FX.co ★ Eurozone to face deep economic crisis

The eurozone economy is one of the largest in the world. Therefore, when this cumbersome giant stumbles and falls down, the world economy immediately feels the repercussions. Both economies are too dependent on each other. This is why the gloomy economic outlook for the eurozone has worsened the market sentiment. Experts fear that global exports may plunge drastically and the global financial system will suffer severely due to the spillover effect.

With a total GDP of about $18 trillion, the euro area economy accounts for 15% of the global economy as well as global exports. Curiously enough, economies of some countries may crush or cease to exist but it will not affect the global economy. However, it does feel the pinch if the block's economy contracts. Besides, analysts voice concern that even the largest world’s economies are experiencing difficulties. It may lead to a full-blown global economic crisis. A prolonged period of economic weakness in the eurozone will also pose a serious threat to the global economy. Additionally, the low demand for exported goods from European countries will deliver a hard blow to the world economy. Many countries are sure to suffer big losses due to the low domestic demand when they will be unable to export goods to the euro area.

Hence, the European Central Bank is likely to take a softer approach to its monetary policy than the US Federal Reserve. As a result, the euro continues to weaken causing great resentment of the US.