Rogoff Says Equity Markets Rally Not Out of Character

Europe’s stock market rally isn’t unusual even amid caution over the robustness of the region’s economy, said Harvard University Professor Kenneth Rogoff.

Europe’s financial crisis “is worse than you might think,” Rogoff said in an interview with Bloomberg Television today in Davos, Switzerland. “After other financial crises, we have had a similar pattern with equity markets, at least for the first few years, so this isn’t something out of character.”

Europe’s Stoxx 600 Index gained 17 percent last year and 14 percent in 2012 as the euro area struggled to emerge from its longest-ever recession. While the downturn ended in the second quarter of 2013, growth slowed in the following three months and European Central Bank president Mario Draghi said on Jan. 9 that the risks to the 18-nation economy remain on the downside.

“There has been some measure of stability in Europe,” Rogoff said. “It’s hardly growing gangbusters. It’s a big improvement from blowing up.”

The Stoxx 600 was little changed at 335.65 at 1:51 p.m. Frankfurt time, and is up 2.3 percent this year. The Standard & Poor’s 500 Index of U.S. stocks has dropped 0.3 percent in 2014.

The ECB projected in December that the euro-area economy will expand 1.1 percent this year after an estimated contraction of 0.4 percent in 2013. The International Monetary Fund forecasts growth for the region of 1 percent in 2014, compared with 3.7 percent for the global economy and 2.8 percent for the U.S.

While the world economy shows signs of improvement, the financial crisis hasn’t been fully overcome yet, Rogoff said.

“Crises do end eventually,” he said. “Maybe we are starting to move away although it is still a long way from full recovery.”

To contact the reporters on this story: Stefan Riecher in Frankfurt at; Tom Keene in Davos, Switzerland at

To contact the editor responsible for this story: Craig Stirling at

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