Despite the fact that the tension between Greece and its creditors has smoothed out, the country still poses a threat to the Eurozone, said Moody’s.
Now that European Union officials state that the danger of a Grexit is almost eliminated, political uncertainty in Greece remains the biggest threat to the Eurozone stability and growth prospect, noted Moody’s in its weekly report.
According to Moody’s, the Eurozone’s economic recovery will move at a slow pace, with gross domestic product increasing by 1.4%, compared to 1% in 2014.
The European Central Bank (ECB) is expected to have very loose monetary policy for an extended period of time and maintain the quantitative easing (QE) bond purchase program, under which it buys 60 billion euros in state bonds each month. The program is put into effect in order to stimulate Eurozone economies and is to remain in force until September 2016 or until inflation reaches the 2% target.
Because of this commitment, Moody’s said, the yield on 10-year Eurozone bonds will remain at very low levels, supporting the economy.
Moody’s predicts that the ECB will begin to smooth out its monetary policy in the first quarter of 2018.
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