Since the failure of the Cyprus “bailout” the euro crisis has once again flared up and investors are once again have become nervous about that future of Europe’s common currency. I believe most of the present problems dates back to ECB’s fatal decision to hike interest rates twice in 2011.
The three graphs below illustrate this - while the US is slowly getting out of the crisis things have in fact gotten worse and not better since ECB’s first rate hike in April 2011.
First from the perspective nominal GDP growth.
Second the horrific euro zone labour market situation versus the gradual improvement in the US.
Finally the price level – the deflationary environment in Europen is becoming in clear