Investors can be forgiven for feeling jittery about the eurozone again, after George Soros, America's most successful investors suggested the economy in Germany could be pulled under by the crisis.
Mr Soros is best known for being the man who 'broke the Bank of England' by betting against the pound during 1992 sterling crash.
Now he is predicting similar problems for Germany. "Germany itself remains relatively unaffected by the deepening depression that is enveloping the eurozone," he said. "I expect, however, that by the time of the elections, Germany will also be in recession."
Is this the beginning of the end for the eurozone? Should investors cut their losses and run? Or could another period of instability provide rich picking. After all despite the debt crisis European stock market outperformed many other Western markets last year.
This week's briefing assess what happened in this troubled region, and looks at option for investors now.
WHAT HAS HAPPENED SO FAR?
Put simply – some European countries spent cash they did not have and then required help from richer nations to pay for public services. This has meant handouts from solvent countries in the eurozone (like Germany), and bailouts from the International Monetary Fund (IMF). In return these countries have been required to implement drastic spending cuts.
It's been three years since Greece was first bailed out to the tune of €110bn. Since then, Portugal has received €78bn from the IMF, Greece received a further €120bn and Spain's banks have been propped up by eurozone funds. Ireland has also received a €85bn boost.
Although there was much talk of Greece exiting the single currency, thus far the concept has been dismissed.
The problem is that the pool of solvent countries is shrinking, and these countries have their own growth problems. The German government has predicted economic growth of just 0.4pc this year; while both the UK and France have both lost their AAA credit rating.
Most recently Cyprus has required a €10bn bail-out – which led to a tax being imposed on its own savers. Italy has also failed to form a government following elections in February. These factors have caused the euro to fall in value against the dollar, and there are concerns that this could have a knock on affect on the share prices of many large European companies – particularly banks.
WHAT IS BEING DONE TO FIX THE PROBLEM?
Most of Europe is in a double dip recession: it appears the bailouts and belt tightening have not yet had the desired effect.
Cuts have failed to stimulate growth and many analysts say that unless there is radical policy change the region could slip into a more serious depression. Last July European Central Bank President Mario Draghi (known colloquially as Super Mario) may have vowed to do whatever it takes to preserve the single currency and return Europe to profitability, but a sustainable economic recovery still seems some way off.
"By bailing out Cyprus, the eurozone averted probably its closest brush with break-up so far – although the consequences would have been greater were a larger country about to leave the single currency," said Norman Villamin, of Coutts Private Bank. "But Europe is not out of the woods. Without economic growth and progress on creating a banking union, the eurozone remains vulnerable to renewed stress."
Germany has taken an active role in proceedings but now faces elections itself, the outcome of which are uncertain. This could potentially further derail European recovery.
HOW HAS THIS AFFECTED THE STOCK MARKET?
The euro crisis might stagger with little sign of resolution, but this hasn't adversely affected the stock market. Since July, European indices have rallied significantly, and those that have bought European funds such as Henderson European Special Situations and BlackRock Continental European have made investors around 30pc in the last 12 months.
This upward trend has continued in recent months – despite the problems in Cyprus. However, European markets remain volatile.
Despite Mr Soros's gloomy view, more bullish analyst say European stocks still look relatively cheap, compared to share prices seen before the euro crisis. They point out that "good quality" European companies, have global reach and well known brands so may be fairly immune to political problems on the continent.
Jacob de Tusch-Lec, manager of the Artemis Global Income Fund said he still thought it was worth investing in European shares, but warned it could be a bumpy ride. "Recent events in Cyprus show how fragile the entire edifice is." he said. Richard Lewis, head of global equities at Fidelity agreed. Although Europe has it problems "there remain some great companies which have exposure to the US and other global markets," he said. "This has helped the European equity market perform relatively well despite the political and economic backdrop."
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