Eurozone: Political woes to be the theme in 2016 – Goldman Sachs

By FXStreet FXStreet (Delhi) – Research Team at Goldman Sachs, suggests that if external shocks pose the greatest economic risk to our Euro area macroeconomic forecast, domestic stresses still represent the greatest political risk to the recovery.

Key Quotes

As events over the past year (for example, in Greece) have demonstrated, the political equilibrium underpinning the stability and integrity of the Euro area remains fragile. And the challenges of the refugee crisis pose threats to that equilibrium, as we have discussed above. To identify a number of vulnerabilities in the political environment:

In Greece, the Tsipras government needs to tackle pension reform before its official creditors will deem it compliant with the new adjustment programme, disburse further financial support and entertain some form of debt relief.

In Spain, the political stalemate that emerged from the recent national elections looks set to continue in 2016, with the issue of whether to permit a referendum on Catalan independence remaining an important sticking point in the formation of a new coalition government.

In France, the recent first round of regional elections saw the far-right Front National (FN) gain 28% of the nationwide vote, reflecting growing disquiet among the public regarding the level of immigration.

In Germany, Chancellor …read more

Source:: FX Street