Is the Euro Crisis Over?

Three years ago, the euro crisis began when Greece became a cause for concern among policymakers and a cause for excitement among money managers. Does the armistice that has prevailed since the end of 2012 mean that the crisis is over?

BRUSSELS – Financial crises tend to start abruptly and end by surprise. Three years ago, the euro crisis began when Greece became a cause for concern among policymakers and a cause for excitement among money managers. Since the end of 2012, a sort of armistice has prevailed. Does that mean that the crisis is over?

By the usual standards of financial crises, three years is a long time. A year after the collapse of Lehman Brothers in September 2008, confidence in the United States’ financial system had been restored, and recovery had begun. A little more than a year after the 1997 exchange-rate debacle triggered Asian economies’ worst recession in decades, they were thriving again. Has the eurozone, at long last, reached the inflection point?

Many battles were fought in the last three years – over Greece, Ireland, Spain, and Italy, to name the main ones. The European Union’s financial warriors are exhausted. Hedge funds first made money betting that the crisis would worsen, but then lost money betting on a eurozone breakup. Policymakers first lost credibility by being behind the curve, and then recouped some of it by embracing bold initiatives. Recent data suggest that capital has started returning to southern Europe.

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