TD Economics says that the efforts to prevent default in some of Europe’s shakier countries may provide breathing room, but don’t solve the underlying problems.

Economic growth will likely be subdued in the region as governments tighten their belts.

In a research note looking at the Europe’s efforts to prevent default in Greece, and other troubled countries, TD concludes, “Although we believe these measures will be effective over the next one to two years in averting severe financial disruptions, the underlying macroeconomic imbalances will continue to pose solvency risks in the medium term.”

Moreover, it says that addressing these imbalances “will be extremely painful” for some countries, and that the fiscal tightening “will very likely lead to a period of slow economic growth across Europe”.

Additionally, it suggests that, even if they make progress on fiscal consolidation, “we still believe debt restructuring might be unavoidable for some of the eurozone members.”

IE