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The global economic crisis is expected to further pan-European interests as the region's financial markets gain strength in 2010 and the euro maintains its status as a major world currency, said leading financial experts at a panel discussion organized by STOXX Limited.
Economic crisis should lead to greater demand for pan-European solutions, as opposed to national ones, in years to come "The global financial crisis has defined the issues that will be among those at the very top of the European Union agenda for the foreseeable future. First, better EU regulation of the financial sector, including the 'parallel banking system,' will have to be fashioned. Further, better micro- and especially macro-prudential supervision will have to be designed and implemented, with a special emphasis on common EU, if not world, standards," said Dr. Giuseppe Ammendola, an international business economist and adjunct professor, New York University. He continued, "Second, it is evident that the euro zone will see its membership grow, given the advantages that the single currency offers in terms of lower costs of issuance of debt. The removal of 'currency' from the list of most typical triggers of financial crises is an additional powerful incentive to try to join the club. Third, the difficulty of relying on poorly coordinated national fiscal policies to mitigate financial crises has become evident. These three factors point to a demand for more and not less 'Europe.' More of a shift of power from member states to the EU is also likely to be aggressively pushed for by federalists with regard to politics and institutions. Another "recessionary dip" would make this even more likely."
The euro remains strong but the role of U.S. dollar as the world's currency reserve will endure "The euro is best understood as an economic solution to a political problem, meaning the European Monetary Union has not been so much a cause as an effect of European integration," said Marc Chandler, head of global currency strategy, Brown Brothers Harriman. He added, "However, the ECB concedes that the existence of the euro has not been able to arrest the trend decline in productivity. Each decade for the past three decades has seen slower productivity growth than the one before. By contrast U.S. productivity has generally been strong, even in this difficult economic period. As a reserve currency, the euro is roughly a quarter of the world's reserves. Most recently, the euro's share has slipped slightly. At the end of the second quarter of 2008, the euro accounted for 26.8% of the world's reserves. As of the end first quarter 2009, the euro's share stood at 25.9%. In contrast the dollar's share rose to 65% from 62.8%. Contrary to conventional wisdom, there is no evidence that the dollar's role in the world economy has diminished either since the advent of the euro or due to the current crisis. Its role as a reserve currency, invoicing currency, and the benchmark currency for commodities-from hydrocarbons, to precious and industrial metals to foods and fibers, will endure for now."
European stocks an attractive investment option as economic growth predicted for 2010 "As the global macroeconomic environment continues to improve, we expect a GDP growth of 2.1% in 2010 for the euro zone countries, which is a level well above consensus estimates for the region," said Jeffrey Palma, managing director, head of global equity strategy, UBS Investment Bank. "Growth will be driven primarily by a normalization of credit conditions and expectations for a recovery in capital expenditures. Relative to other global markets, we believe valuations for European equities are attractive, particularly compared to the U.S."
Year-to-Date Performance of Key Indexes (as of 9/14/09) Dow Jones STOXX 600 Index: 21.46% Dow Jones STOXX 50 Index: 17.04% Dow Jones EURO STOXX 50 Index: 15.59% Dow Jones STOXX Nordic 15 Index: 34.29% Dow Jones STOXX EU Enlarged 15 Index: 23.33% Dow Jones STOXX Balkan 50 Index: 47.87% Dow Jones STOXX Eastern Europe 30 Index: 51.52%
