(MintPress) – While European economic leaders are claiming the eurozone debt and economic crisis is winding down, a top U.S. economist is claiming that’s far from the case.
Barry Eichengreen, an economic and professor at University of California-Berkeley, claims the extent and gravity of the economic crisis rocked the nation beyond the hope of smooth recovery, telling the Associated Press that the crisis will do anything but subside, and will instead wreak havoc within the 27 member states throughout the year.
“Nothing has been resolved in the eurozone, where markets have swung from undue pessimism to undue optimism,” he said. “They said all the right things last year … and they’ve been backtracking ever since.”
The trend of Euro optimism is being generated through the banking industry, at least in part. European Central Bank President Mario Draghi told the World Economic Forum that markets for stocks, bonds and bank credits have begun to stabilize, but also warned that it isn’t cause for celebration just yet.
“We haven’t seen an equal momentum on the real side of the economy and that’s where we will have to do much more,” he said, according to the German media organization Deutsche Welle.
The success is largely pointed to efforts implemented by the European Central Bank, which essentially gave European countries a deal: The bank offered to purchase bonds issued by countries swimming in debt, so long as those same countries began to pay down their debt.
And while this did offer some stability, it’s not the total solution. And Eichengreen warns against attitudes that would leave European leaders into thinking they can now relax.
“None of the underlying problems have been solved,” he told the Associated Press. “There is no economic growth in Europe. Germany itself is on the very verge of recession. The banking union doesn’t exist. There’s less consensus on completing it than we thought last year, so the markets are going to lose patience at some point and the crisis will be back.”
The banking union Eichengreen speaks of is one that was set up essentially to limit banks’ ability
to negatively target the economy of any one European country.
“Member States have agreed to hand over the key supervisory tasks over their banks to the European Central Bank,” Michel Barnier, member of the European Commission said in a press release, issued Dec. 17, 2012. “This is the first step towards the Banking Union. The ECB will be in a position to detect risks to the viability of banks. And require banks to take the necessary actions.”
The Eurozone is considered the largest economic body in the world.