What next for the euro?

Note: The following article is expanded from the current issue of Cargo Facts Update. We encourage those of you who do not already subscribe to the monthly printed Cargo Facts newsletter, and its companion the weekly emailed Cargo Facts Update to click here for more information

 

 

When we sent out this week’s issue of Cargo Facts Update yesterday, European leaders were settling in for  their final day of a two-day summit to find a solution to the Eurozone sovereign debt crisis. At stake? Perhaps the future of both the Euro as a currency, and the EU as a political and economic entity. When they emerged at 05:00 this morning it was to announce what amounts to a new Europe. The UK was out, Sweden, the Czech Republic and Hungary were on the fence, while the remaining 23 countries — very much led by France and Germany — were in a revamped EU that looks to be on a path toward greater central control.

 

Whether this was the right move, a move that will allow the sovereign-debt contagion to be contained, and preserve the euro as a viable currency remains to be seen, but it had become clear that the old European Union was incapable of achieving either of those goals.

 

We do not have space to analyze the political and economic impacts of what happened last night in depth, but point out that the International Air Transport Association issued a new forecast two days ago in which it said that, all other things being equal, the aviation industry would likely generate a profit of US$3.9 billion in 2012 – not much, but at least a profit. However, said IATA, “should the Eurozone crisis evolve into a full-blown banking crisis and European recession, the global aviation industry could suffer losses exceeding $8 billion in 2012.” This is a swing of $12 billion in just this one industry alone. Looking specifically at cargo, IATA said that if the crisis was resolved, or at least contained, 2012 cargo traffic would be roughly flat with 2011, whereas if the crisis was not resolved cargo traffic would decline 4.7% compared to 2011.

 

  Like This Post

Leave a Reply

Your email address will not be published.