Although, the Euro economy is less affected by the global credit crunch, there are still many factors contributing to a deteriorating economy.
- High value of Euro, making it difficult for Euro Exporters, espcially in Germany and France.
- Housing Boom and Busts. With most attention focused on the US housing market, not many know that European house prices, in many countries have increased much more than US house prices. For example, French house prices have increased 140% since 1999 (only 80% increase in US). In Spain and Ireland, the housing bust is more pronounced leading to a loss of jobs in the construction sector. (overvalued housing markets)
- Slowdown in export partners. The UK and US economies are slowing down reducing demand for Euro exports.
- Rising Oil prices. Most euro economies are net oil importers. Rising prices are squeezing living standards and reducing spending power.
- Inflation and Higher interest rates. Rising cost push inflation has caused the hawkish ECB to increase interest rates (currently 4.25%) this has further reduced demand and spending
- Signs of rising unemployment and decreasing output.