하나은행 하나금융연구소

The european fiscal crisis is basically a prolonged state of the global financial crisis.
-The financial sector in the eurozone was hit hard by its exposure to sub-prime mortgages
during the global financial crisis, and with regional governments taking proactive policy measures,
fiscal conditions there worsened even more to a great extent.
-Worse yet, challenges caused by growing imbalance in the region rose to the surface and
pushed the closely interconnected eurozone countries to be a weak link in global sovereign risk issues.
 

By the spring of 2012, uncertainty over the european fiscal crisis is likely to linger on.
-Although political turmoils in crisis-hit EU members have calmed down, the region will continue
to be tested with a massive amount of sovereign bonds approaching maturity between February
and April next year amid high uncertainty over whether reforms and austerity measures can be sustained.
-With growing concerns for potential contagion into financial sectors indirectly exposed via CDS and
other derivatives, there is a possibility of massive deleveraging in the process of writing off loss and
raising capital in the intraregional financial industry.
-Although governments are seeking multi-faceted efforts with consensus building on internal and
external impacts of the crisis, the region will remain vulnerable unless progress is made to achieve
fiscal integration and develop vision for one Europe.

Caution should be taken against potential shock on global demand, although there will be no re-run of
the sub-prime crisis.
-There is a slim chance of further deleveraging considering that the crisis does not involve risk from
complicated derivatives products which were the key link in the sub-prime crisis and that most of related
exposure has been already considered. Liquidity squeeze is also only limited to Europe as of yet.
-However, with economic downturn in Europe prolonged owing to fiscal tightening and credit crunch,
the global economy should be slowed down as the crisis originated in southern Europe spreads into
key countries.
-The Korean economy will be subject to only minor direct impacts, given improved foreign currency
liquidity since the global financial crisis, but it still needs to keep a close eye on potential impacts
on the real economy resulting from a contraction in global demand.

Fallouts from the eurozone crisis will gradually fade away, but another uncertainty may come to the surface. 
-International and intra-regional policy coordination is likely to ease off the euro crisis, but other uncertainties
of budget deficit and dollar liquidity squeeze in the US and potential hard landing of the Chinese economy
may threaten the global economy.

(This report is the 1st one in 3 Global Risk Series reports.)