Going forward, northern Europe's biggest concern is whether growth will slow in robust economies like China, which could hinder earnings growth for some multinational companies, says Martin Jansen, head of international equities at ING Investment Management. To slow inflation, leaders in emerging nations like China, India, and Brazil have raised interest rates, which could crimp growth. Over the weekend, Chinese Premier Wen Jiabao said the country has lowered its growth target to 7 percent, a percentage point lower than it had been over the past five years. (By comparison, the Chinese economy grew at a rate of 10 percent in 2010.)
In peripheral Europe, the economic outlook remains fairly bleak. In Greece and Ireland, Jansen says, "the probability of a debt haircut ... is pretty significant." As for concerns about the crisis spreading to larger economies like Portugal and Spain, he says they will probably avoid any major debt restructuring.
Unrest in the Middle East is problematic for the entire European region. Some European countries have close economic ties with politically unstable Middle Eastern nations. Italy, for instance, relies on a pipeline from Libya for a some of its natural gas supply. And there's the more obvious problem. "If [the unrest] spreads further, it could lead to another spike in oil prices," Jansen says. "That, in turn, could really derail a fairly fragile recovery, particularly for the developed countries."