The euro has been saved and the euro crisis is a
thing of the past, European commission
president José Manuel Barroso has declared. But his optimistic comments and the prospect of
looser rules for banks failed to lift markets,
which ended a strong run of recent gains. "I think we can say that the existential threat
against the euro has essentially been overcome,"
Barroso said in Lisbon. "In 2013 the question
won't be if the euro will, or will not, implode," he
said. Barroso has maintained an optimistic stance
throughout the crisis, but his comments were in
sharp contrast to the new year's message from
German chancellor Angela Merkel, who told TV
viewers last week that the currency zone faced
another rocky 12 months. City analysts are also deeply concerned that
austerity measures demanded by Brussels as the
price of bailout funds would lead to prolonged
recessions in periphery countries and the need
for steeper spending cuts. Cuts to essential public services in Spain, Italy,
Greece and Portugal are expected to increase
unemployment and lead to further social unrest. Protests on the streets of Madrid on Monday
highlighted the tensions inside the euro area
after banner-waving protesters blamed Brussels,
Berlin and the right of centre PP government of
Mariano Rajoy for privatisations and cuts in
healthcare spending. Elga Bartsch, an analyst at Morgan Stanley, said
she was anxious that Barroso and his colleagues
in Brussels would fail to resolve long-running
disputes over the EU's new institutions. "The euro crisis seems contained for now. But
we think it is not resolved for good. In
addressing the fundamental flaws in the euro's
institutional set-up, progress on banking union
will be key. Assuming no crisis escalation, the
euro area should re-emerge from recession and return to sub-par growth. Politics is the main
risk," she said.