By Hugo Dixon
Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.
The markets are right to worry about the euro zone, the epicentre of last week’s fright. Its three big economies – Germany, France and Italy – are, in their own ways, stuck.
There is, in theory, a grand bargain that might shift the malaise. This would involve deep structural reform by Berlin as well as Paris and Rome; quantitative easing by the European Central Bank to boost inflation; and some loosening of fiscal straitjackets.
But such a deal – hinted at by Mario Draghi, the ECB president, in his Jackson Hole speech in August – is unlikely to materialise soon, if at all.
In the meantime, the region is being battered by shocks from outside and within. The external shocks are: the slowdown of emerging economies, especially China; the row with Russia over Ukraine; the Ebola outbreak; and the war against Islamic State.