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A Breach in the Eurozone Dike

PRINCETON – While all eyes have been on the European periphery, has the core been cracking? The Bundesbank has lowered its forecast for German annual GDP growth in 2013 to 0.4%. The Central Bank of the Netherlands expects Dutch GDP to shrink by -0.5% this year – following a contraction of about 1% in 2012.

The eurozone crisis may be entering its third stage. In the first stage, beginning in the spring of 2008, the locus of the North Atlantic crisis moved from the United States to the eurozone. Banks in the eurozone came under pressure, and interbank tensions increased.