El-Erian Warns “Don’t Be Fooled” By Europe’s Tranquility
by Tyler Durden
August is traditionally Europe’s holiday month, with many government officials taking several weeks off. In the process, important initiatives are put on hold until the “great return” at the beginning of September. This year, there is another reason why Europe has pressed the pause button for August. With a looming election in Germany, few wish to undermine Chancellor Angela Merkel’s likely victory. Some of the recent economic news has seemed to justify this approach. Yet no one should be fooled. This summer’s sense of normality is neither natural nor necessarily tenable in the long term. It is the result of temporary and – if Europe is not attentive – potentially reversible factors. If officials do not return quickly to addressing economic challenges in a more comprehensive manner, the current calm may give way to renewed turmoil. In essence, Europe (and the West more generally) owes its recent tranquility to a series of experimental measures by central banks; consequently, the resulting surface calm masks still-worrisome economic and financial fundamentals.