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When history looks back on the financial crisis and studies its deep, wide-sweeping effects on the global economy, it seems likely that Europe will be recognized as the region where the hardest battles were fought. Unemployment across the euro zone hit a record high of 11.8 percent toward the end of 2012, and GDP is expected to contract for a second straight year. The common currency was put on the chopping block, and the butcher’s hand was stayed only by the extraordinary efforts of the International Monetary Fund, the European Central Bank, and national finance ministers.
Mario Draghi, president of the ECB, has been hailed as the euro’s savior because of a bond-buying program that diffused what became a dangerous level of tension in the markets last year. Draghi spearheaded operations that demonstrated commitment to nations in crisis, such as Spain, Greece, and Italy, removing crippling uncertainty about the fate of the region and the currency.
Now, after billions in bailouts and severe austerity measures that sparked riots across the region, market sentiment is struggling to remain positive. Many of the mechanisms necessary for recovery have been put in place, but there’s no guarantee that things won’t get worse before they get better.
At the World Economic Forum’s annual meeting in Davos, currently underway, Draghi said that while the bond-buying maneuver helped remove risk for the euro, “we haven’t seen an equal momentum on the real side of the economy.”
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