In 2010, the debt crisis within the eurozone took investors and policy makers outside the EU by surprise, raising concerns over the future of the common European currency. The crises in Greece and Ireland sent shockwaves through Asia, destabilising financial markets and sparking anxiety about the future of the global recovery. Chan-guk Huh, professor of international trade at South Korea's Chungnam University, tells Europolitics how Asia is concerned at the financial troubles on the old continent and how it has weakened the credibility of the euro in the most dynamic region in the world. The Korean economist expects further difficulties in 2011 and urges the EU to address the structural economic weaknesses of some of its member states. Huh also stresses the need to put on hold the expansion of the eurozone for the time being.
Do you think the recent financial crisis in Europe (Greece, Ireland) has weakened the EU's credibility on the world stage?
The crises were a true stress test and have definitely highlighted weak points within the eurozone, thus reinforcing doubts about the sustainability of the euro. The euro project is a major part of the EU's long-term goal of closer union of European states. Therefore, doubts about the euro, especially due to the lack of fiscal policy coordination among member states, have weakened the EU's credibility and also the perception of its ability to solve its own problems.
Do you expect further turmoil in 2011? What are the main challenges for the eurozone over the next six months?
A repeat performance of what we saw in 2010 more or less is expected. At the moment, it's hard to expect a strong global growth momentum emerging somewhere that could lift those member states that have financial and/or government sector problems out of the troubled waters. The main challenge for the EU is to contain problematic situations as they develop. At the same time, the Europeans have to convince markets that they are going to remedy the difficult structural weaknesses that have been exposed.
What is the impact of the euro crisis in Asia? Do you believe there is a risk of a breakup of the eurozone?
Until 2008, many in Asia had criticised their respective central banks for not increasing the euro's share in their foreign exchange reserve portfolios. It will take a few years for this enthusiasm for the euro to return to Asia. I don't expect a wholesale breakup of the eurozone, but a...