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| After you, globe |
| Ian Campbell / Nov 18, 2009, 00:57 IST |
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Eurozone economy: The eurozone’s economy is at last inching forward. Germany is in front. But it would be a mistake to portray either Germany or the broader eurozone as strong. Most of the region, though not Spain or Greece, has shifted into first gear. The confidence needed to accelerate into second seems lacking. Instead, the eurozone is still looking for a tow from a stronger world.
It is world trade rather than European consumers that has the continent moving at all. Germany, the big export engine, grew by 0.7 per cent in the third quarter, following a rise of 0.4 per cent in the second. “Especially exports,” as the German statistical office quaintly put it, was the driver. German consumers spent less.
Yet the country’s modest, export-led acceleration was better than the rest of the eurozone could manage. France just about confirmed its emergence from recession with 0.3 per cent growth while Italy pulled away from the recessionary kerb with a jerky 0.6 per cent. Spain, where falling real estate is still blocking the road, and Greece, both remain in recession. The eurozone has grown less than half as fast as the US following five quarters of contraction that had shrunk the economy by twice as much as the US fall.
What is holding the area back? It had its eager consumers in Spain, Ireland and Greece. But they’re now in trouble. Its biggest economy, Germany, has suffered from weak consumption for a long time. The reluctance to spend is unlikely to change soon. German unemployment would have increased more had it not been for government incentives.
Further rises will keep consumers anxious. Credit is scarce. And the strong euro is a big problem, making it harder for exports to pull the zone along.
Wolfgang Schäuble, the new German finance minister, is suggesting tax cuts are a way forward. Cautious Germans have their doubts. They rightly feel their fiscal deficit, which may approach 4 per cent of GDP this year, is too big. Yet Schäuble may be right. Germany’s consumers need to fuel more of their country’s growth. In an ideal world, they would fuel more global growth too.
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