BRUSSELS – During my current trip to Europe, I have been encouraged by the hope and deeper sense of economic and financial calm that has arrived this spring. With risk spreads compressing markedly, the region’s financial crisis has been relegated to the history books, and the region is again attracting the interest of foreign investors. Consumer confidence is recovering as well, and businesses are again looking to expand, albeit cautiously. Economic growth has picked up and unemployment, while still alarmingly high, has stopped increasing in most countries.
Remarkably, all of this is occurring in the context of a major geopolitical crisis to the east, following what the Financial Times rightly pointed out constitutes “the first annexation of another European country’s territory since the Second World War.” Equally disturbing, Russia’s annexation of Crimea has occurred with stunning ease – indeed, simply “with the stroke of a pen,” as the FT put it. And neither Western Europe nor the United States can even pretend to provide a military counterweight to Russian actions in Ukraine.