The Euro Will Fall Into Recession Before The US.

On the 11 day, in the Financial District of London, people walk in Canary Wharf under the sun.

In the face of the financial crisis, the major western countries are shrouded in the gloom of economic recession.

The financial crisis originated in the United States, but the euro zone on the other side of the Atlantic was in recession before the United States.

Analysts pointed out that, in relative terms, this has nothing to do with the thinner, slower response and more rules of the euro area countries.

Last summer, when the US sub prime mortgage crisis broke out, the euro zone felt the chill and became a direct victim. A large number of euro area financial institutions suffered heavy losses because of their investments in US subprime products.

This year, the financial turmoil that originated from the US Wall Street has struck again, and the eurozone has yet to escape.

Due to the close ties between European and American financial markets, the eurozone is basically immune to the financial crisis originating from the United States, and some member countries' financial industry is even weaker than the United States.

Of course, from the perspective of the financial sector, the loss of the euro area should not be greater than that of the United States, but the impact of its real economy is very serious, first of all because the euro area countries' "bottom" is not as thick as the United States.

For a long time, the eurozone economy is less vigorous than the US economy.

Despite the strong recovery of the eurozone economy for two consecutive years before the outbreak of the subprime crisis, the economic growth rate in 2006 has reached 2.9%, but this figure is only the average level of the US economic growth over the past decade.

At the same time, the financial crisis is more lethal to the financial industry of euro zone countries.

Compared with the US, the euro zone economy is more dependent on the financing of the banking system, which means that the credit crunch triggered by the financial crisis is more likely to spread from the financial sector to other industries and impact on the real economy.

Secondly, in the process of coping with the financial crisis, the governments of the euro area countries lagged behind and once "fought for their own".

For this sudden financial crisis, the euro zone countries are obviously lacking in foresight.

At the EU summit held in June this year, EU leaders even predicted that the worst time for the financial market would be over.

Too confident euro zone countries always believe that their country is not the center of financial turmoil, and will not be affected too much. So when the crisis comes, countries will be caught off guard and fall into a situation of fighting for themselves in order to protect themselves.

Because of the high degree of interdependence among European banks, the "single soldier operation" is not only effective but also easy to hurt each other.

After many efforts, the eurozone countries agreed to join hands to formulate a unified framework to deal with the financial crisis, but it has been "slow down".

More importantly, the lack of effective measures to tackle the financial crisis has aggravated fears of the euro zone's economic prospects and eroded crucial economic confidence.

At present, euro zone countries have divergent views on how to work together to save the real economy, which undoubtedly cast a shadow over the euro area economy.

The European Central Bank did nothing at the beginning of the financial crisis, which is also an important reason for the economic downturn in the euro area.

When the United States began to stimulate the economy by cutting interest rates, the European Central Bank, which was in charge of the euro zone monetary policy, raised interest rates until inflation was raised in July. It was too late to cut interest rates until the financial crisis broke out.

Analysts believe that the euro zone's economic policies are far less flexible than the United States, thus binding the euro zone countries to save the economy.

The EU's Convention on stability and growth requires that member countries' fiscal deficits should not exceed 3% of GDP. The debt level should not be higher than 60% of GDP. Even under the special circumstances of the current financial crisis, the deficit of euro area countries can only be temporarily exceeded.

Some euro zone countries complain that this provision severely restricts the scope of their expansionary fiscal policy. At present, increasing public expenditure is considered to be the most effective way to avoid a serious economic downturn.

In addition, strict anti government subsidies also make the euro zone lack flexibility in coping with economic difficulties, making it difficult for euro zone countries to lend their support to specific industries or enterprises according to their own circumstances.

Although the European Commission believes that adhering to anti government subsidies is to maintain fair competition and is in line with the long-term interests of the European economy, how to grasp the scale of anti government subsidies will be a difficult problem for the euro area countries in the current financial crisis and economic recession.