It must be noted, according to the economists, that although the European economy has reaped the benefits of globalisation, it has also been more rapidly “contaminated” by the effects of the US sub-prime crisis because of the inter-connection of markets. Confidence across markets globally has indeed been affected.
Fortunately, the economic revival of the euro area over the last 12 months has helped the private sector reinforce its financial position, which should provide a tangible source of economic strength for the coming months. EMAC members stress that the EU is in a better position to face such turmoil now than it would have been a year ago. They also welcome the European Central Bank’s reaction to the market turmoil. Assuming oil prices go down, inflation risks should be minor for the coming year, with core inflation rates estimated at 2% and headline (HCIP) at 2.2%.
Generally speaking, EBF’s EMAC members still anticipate a strong euro for 2008. On average, they foresee a euro at 1.41 to the dollar by the end of the coming year, with individual forecasts ranging from 1.33 to 1.60.