Cementing Europe’s Recovery

Europe’s renewed sense of hope and confidence, however encouraging, is not yet sufficient to produce appreciable gains for current and future generations. A few things need to happen over the next several weeks and months if Europe is to minimize the risk of another prolonged period of under-performance and financial risk.

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.

Yet, rather than disrupt its growing confidence and composure, the Ukrainian crisis has been a catalyst for renewed political cooperation and solidarity within Western Europe. It has also fostered closer relations with the US at a time when political leaders face inevitable headwinds in completing historic negotiations on the proposed Transatlantic Trade and Investment Partnership (TTIP), aimed at boosting economic ties in a manner consistent with a strengthened multilateral system.

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