“The term ‘banking union’ could well be one of the potential issues causing volatility in Europe. We expect inflation to be low, while there is no danger of deflation.”
THE BEARS
Bob Jolly, head of global macro, Schroder Investment Management
“Europe appears to be at least 18 months behind the US on the road to recovery, and it is currently stalling. Eurozone unemployment is around 12 per cent and is likely to go up rather than down.
“One of the reasons growth is not accelerating is that banks are unwilling to lend to companies as they fear the risk of defaults and blowing even bigger holes in their balance sheets.”
Trevor Greetham, director of asset allocation, Fidelity Worldwide Investment
“Falling inflation in the eurozone is putting pressure on the ECB to ease further, with negative deposit rates and some form of quantitative ease under discussion.
“We remain underweight in Europe, although to a lesser extent than at the height of the crisis. A return of confidence has reduced the pressure to complete fiscal and banking union. Earnings revisions remain negative and political tensions are likely to return when the world economy next hits a weak patch.”
