ECONOMISTS still believe that the Eurozone will break up in the next four years despite a groundbreaking deal struck by policymakers for Greece’s second rescue last week.
Capital Economics’ chief European economist Jonathan Loynes says: “We maintain our position that there is a smaller than evens chance that the Eurozone will survive the next four years in its current form.”
And Lombard Odier Investment Managers’ Stéphane Monier said: “We continue to worry about the peripheral countries’ capacity to deliver on their adjustment programme.”
Despite the show of unity on Thursday, markets are still anxious that the deal could unravel. Chancellor Angela Merkel has said that Germany’s parliament will not debate the necessary changes to Europe’s main bailout fund until September, leaving two months of uncertainty.
Economists’ concerns were expressed in a quick end to Thursday’s rally. Markets rose on Friday morning but sank back towards their opening prices by the close of play. Bond yields for Italian and Spanish debt also rose: the yield on Rome’s ten-year bonds rose from 5.3 to 5.4 per cent and the equivalent rate on Madrid’s debt crept up seven basis points to 5.77 per cent.
The euro also lost steam, falling 0.4 per cent against the dollar yesterday, and three-month Euribor – the Eurozone’s benchmark interbank lending rate – rose to 1.61 per cent on Friday, its highest level since March 2009.