Speaking from Canada on Thursday after a brief summer vacation, German Chancellor Angela Merkel reconfirmed her intention to work towards the preservation of the euro no matter what the cost. Her sentiment echoed that of ECB president Mario Draghi who has been making the same promise for quite some time. Following this announcement, the common currency rose against the dollar in Friday’s Asian session. The Euro also rose against the yen and the pound.
Despite investors’ renewed optimism about the euro zone crisis, the latest Reuters poll of economists indicated that the region will remain on a downswing until 2013, and that the euro zone narrowly avoided recession in the first half of 2012 because it was buoyed by German’s moderate growth. The Reuters poll forecasted that the economy in Europe will continue to contract at a rate of 0.2 percent in the third quarter of this year, the same rate of contraction it saw in the previous quarter. The economic problems are expected to be unequal among member countries, with Spain, Italy and Greece likely to continue bearing the brunt of the downturn.
On a more positive note, the possibility of a Greek exit from the European Union is beginning to seem less likely, as economists are starting to believe that remaining as a member will be best for both the country and the other members of the union. Investors remain wary about this issue but are watching with reserved optimism and the hopes that a final decision will inevitably strengthen the regional economy.