While the world braces for the next euro zone fiscal crisis flare-up, an analyst at Japanese financial conglomerate Nomura suggests that whatever bad news is just around the corner will not damage global economies as much as such crises once did.
The markets have been quiet for much of this month, partly because European leaders have been on vacation, as apparently have major investors. But it is widely understood that this is only a calm before the next storm, perhaps Greece leaving the euro zone or Spain requiring a financial rescue to avoid default.
Furthermore, much of the tense anticipation stems from a sense that whatever happens in Europe certainly won't stay in Europe.
But those worries may be overblown, according to Jens Nordvig, managing director of currency research at Nomura. Using data on changes to GDP projections for countries outside the euro zone during the past few years and comparing those data to specific countries' trade and geographical distance from Europe, he concluded Wednesday that "global risk assets may hold up in coming months, even in the face of some renewed tension in the euro zone."
There are various reasons for the expectation that an imminent worsening of the euro zone's crisis will not be a repeat of previous years. First, the tightening of credit conditions seen during the latest flare-up has not been global in scope and, given that Europe's leaders have very clearly instituted a policy of saving the banks first, has not led to disruptions in the global financial system.
Second, "the euro crisis is old news at this point." In other words, the shock-and-awe factor that rattled financial markets in the past might not be there this time around.
Finally, there's also the belief "that policy makers in Europe will eventually do what it takes to restore confidence and stabilize markets."
The logic behind the arguments is remarkably simple: "Compared to the downturn in 2009, the downturn in 2012 has been less globally synchronized," Nordvig writes. A chart below illustrates.