Eurozone Crisis Seen Through Asian Eyes

on Jul 26, 2012
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With the seemingly endless Eurozone crisis monopolising ‘western’ financial media at present, it’s pertinent to keep in mind that the eyes of the wider world are also fixed on the various aspects of the drama. Especially on the diametrically opposed positions of the two ‘Gs’ – Greece in its downward spiral into sovereign insolvency and euro-exit and then Germany, in economic terms marching away from its fellow member-states in their time of stress.

One such foreign observer is the CCFG Group – a state-controlled (of course) Chinese agency in the chemical fibres and textiles sector. In a piece uploaded to its website on 27 July, CCFG Group notes the results of a just-released German consumer confidence survey. According to the poll conducted by GfK research institute, consumer confidence is expected to rise modestly for August, to 5.9 on the index compared with 5.8 for July. But CCFG’s take on the data is that it is first and foremost confidence in Germany’s internal economy, and crucially confidence as regards income maintenance, which is fuelling this expectation that things are looking better – albeit not hugely – for German consumers.

!m[](/uploads/story/207/thumbs/pic1_inline.png)As the Chinese agency notes, the same cannot be said for consumer sentiment in any other large EU country at the present time. Just last week, the UK reported a further quarter’s contraction of its economy, by some 0.7 percent, the third in succession and putting the country firmly in double-dip recession. Spain and Italy – well, enough said.

So, for nervous governments in Asia and elsewhere around the globe, any positive signs coming out of Europe are straws to be clutched at with alacrity. Beyond their domestic markets and, to a much lesser extent, their regional markets, the European Union has become and continues to be of critical importance to the well-being of many countries. The head of Singapore’s Monetary Authority, Ravi Menon, told a news conference last week that the Eurozone crisis was “[t]he key risk facing the Singapore economy and financial system”. He added that Singapore, an international financial centre, should brace itself for “excessive inflows as well as outflows” of capital, which could impact on the Singapore dollar.

And this is the worry of many countries – that an uncontrolled collapse in Europe’s single currency could see spin-off effects in their own financial markets, producing outcomes which damage their own fragile economic conditions. As to timing, the Malaysia Insider’s business section led on 30 July with an indepth analysis headed ‘Euro Zone crisis heads for September crunch’ and suggesting that a range of factors that month will align to bring matters to a head

Viewed from an Asian perspective, Europe is not however all doom and gloom. Speaking on CNBC earlier this month, Vikram Chakravaty of global management consultancy A T Kearney, and author of newly-published ‘Asian Mergers & Acquisitions – Riding the Wave’, suggested that the heightened M&A expertise of many Asian companies will see them well-placed to pick up bargains in distressed European value-adding enterprises. Aside from the obvious contenders of China and India, Chakravaty forecasts cashed-up corporates in South Korea, Malaysia and Indonesia looking to acquire European know-how and market access which would otherwise take years to develop from their home bases.
A case perhaps of the European cloud having an Asian lining.

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