Eurozone deterioration and possible Germany exit

by Donny Kendal, Staff Writer

With more bailouts and bleak outlooks, the possibility of a breakup in the European Union has increased in recent months. New speculation suggests Germany may be the first country to leave.

The recent recession has claimed a number of victims since the start in 2007. So far, Greece, Portugal, Spain, and Cyprus have all required bailouts. These bailouts have been at the expense of the more solvent nations and some international organizations like the International Monetary fund. The economy of the area, however, continues to deteriorate.

A study and survey of economists by the Economic Times underlines the problems for the Eurozone countries. The result of the survey is a reduction in growth expectations for the EU. The economists see a likely decline of 0.4 percent, down from a previous expectation of a 0.1 percent decline. The survey also sees a rise in unemployment throughout the year, peaking in 2014 around 13 percent.

The bad news for the EU has been piling up over recent years. The UK and France lost their Triple-A ratings. Italy recently stirred markets after it failed to form a government after its February elections.

“It’s a bleak outlook, we don’t see any growth in any quarter this year or next, and the absence of a government will not help,” said Giada Giani, euro zone economist at Citigroup, regarding Italy.

Germany has been the most financially stable country and most able to help sustain struggling countries. Unfortunately, this balance cannot continue forever. Seasoned investor and philanthropist George Soros recently said that he expects Germany will be in a recession by September.

Soros suggested in an article by The Telegraph that Germany and the EU may be better off if Germany exited the Eurozone.

“The situation is deteriorating, and, in the longer term, it is bound to become unsustainable,” said Soros. He explained that a disorderly exit of Germany instead of an organized departure would be a worst-case scenario for the region.

The future of the EU is unclear. Markets have been unstable since the crisis in Cyprus rattled the financial sector. The actions of Germany and the European Central Bank in the face of this crisis will define the region and how it continues.