By NewsCollective/ Shout-Africa
After a long month of uncertainty, the Euro is slowly inching up the global economy charts. But it is still too early to pop the champagne, as the Euro is still tottering due to the downgrade of Spain’s credit, which is a reminder that the debt crisis has not yet passed away says Vinita Bhatia, Head-NewsCollection Room, NewsCollective
For more than a month now the Euro has been taking a battering in the global markets. It finally got some respite today as it stabilized against the dollar. However, this is the time for cautious optimism in light of the act that Fitch Ratings downgraded Spain’s credit rating. Fitch cut Spain’s credit rating by one notch to AA-plus on Friday, stating that the country’s economic recovery will be more muted than the government forecast due to its austerity measures.
This has again given a stark reminder to all about Europe’s existing debt woes and how it could still have far-reaching ramifications on the global economy. The Euro zone countries are still not showing a lot of confidence in the unified currency and its slide against the dollar and are proceeding with a lot of caution.
This was also because of the warning delivered by Chinese Premier Wen Jiabao who said that the global economic growth continued to remain vulnerable to sovereign debt risks, which threw up the possibility of a second downturn. He was however confident that China’s national growth would be unaffected and stay on track.
Wen Jiabao’s comments have made market players apprehensive about the China’s stance on Euro zone bond holdings. Even country’s central bank recent claimed that Europe will be a key investment market for its foreign exchange reserves has not really helped raised their comfort levels. With things as slippery as they currently stand, no one wants to take undue chances.
The calm mood in the markets could also be on account of the long weekend in some parts of world. But this could sooner change to volatility to other economies in the Euro zone, if the European debt problems are not tackled quickly.
This has put the focus on the meeting of the finance ministers and central bankers from developing economies. The top item on the agenda of this meeting, which will be held in South Korea, will be how to handle the Europe’s debt crisis and how the global economy can be re-balanced.
With so much hanging in balance, there will be several who will go down on bended knees praying for this situation to improve and fast.