The global financial crisis (GFC) is still a lingering threat to the financial and economic system as the European economy struggles to find its feet.
Much depends on how the European countries will restructure their fiscal policy over the coming years, a new report by Towers Watson has found.
"The main issue for public policy, within and outside the euro area, is not the current level of government debt but the size of structural deficits and the implied transition path for future debt levels," Towers Watson investment business leader Graeme Miller said.
Recent actions of European policymakers have temporarily reassured markets and only gained them sufficient time to introduce necessary policy measures and consolidate the weak financial outlook, Miller said.
Towers Watson maintains it will be extremely important to monitor the implementation of the announced support programme, as well as the progress made in consolidating fiscal policy and rebalancing the European economy.
"Structural reform of fiscal policy is likely to remain a key issue over the coming years and is also much more important than a restructuring of current debt levels in small economies," Miller said.
