Eurasian Integration Yearbook 2012

Elvira Kurmanalieva, Konstantin Fedorov. “The Impact of GlobalFinancial and Economic Instability on the CIS”The Economics of the Post-Sovietand Eurasian Integrationa drastic fall in economic activity and a slump in equity and commodity pricesin 2008, economies and markets recovered considerably in 2009-2010 with thehelp of energetic fiscal and monetary incentives implemented by governmentsthroughout the globe. The situation worsened in the second half of 2010 and,particularly, in late 2011 and early 2012, when the high government debt ofsome eurozone countries made investors doubt whether they could service itfurther. Over the past two years the European authorities have been looking formeasures to mitigate the debt crisis by providing support to debtors through theEuropean Central Bank (ECB) and newly created stabilisation mechanisms suchas the European Financial Stability Facility (EFSF) and the European StabilityMechanism (ESM).In the meantime, the debt crisis began to affect the economic situationin developed countries throughout 2011. In the fourth quarter of 2011, theeurozone economy had negative growth and international organisationspredicted that it would remain in recession throughout 2012. The economicdownturn in Europe has affected international trade: after an average increase of15% in 2010, the growth of the global trade dropped by 6% in 2011 and 2.7%in the first quarter of 2012 and the growth in exports by developed countriesdeclined to 2.4% and of developing economies to 3%.Today, several factors exist that could potentially worsen the world’s economicsituation in 2012 and for the next several years.a. Recurrences of the eurozone debt crisisSince the stability of European economies with a high level of debt does notseem certain, many observers still believe their default and withdrawal from theeurozone to be the most probable outcome of the crisis. Despite the noticeable1510502520151050Figure 7.1.Governmentbonds yield,2 years to maturitySource: BloomdergJanuary, 2010March, 2010May, 2010July, 2010September, 2010November, 2010January, 2011March, 2011May, 2011July, 2011September, 2011November, 2011January, 2012March, 2012May, 2012Spain Italy Portugal (right axis)Eurasian Development Bank119