quartermaster
August 13th, 2009, 03:36 PM
Eurozone data raise hopes for recovery
By Gerrit Wiesmann in Frankfurt and Ben Hall in Paris
Published: August 13 2009 09:07 | Last updated: August 13 2009 19:25
The German and French economies unexpectedly bounced back in the second quarter, raising hopes that the worst of the economic crisis is coming to an end in the eurozone.
The region’s two biggest economies, which had each suffered four consecutive quarters of negative growth, both grew 0.3 per cent in the three months to the end of June, figures showed on Thursday.
The figures confounded economists who had predicted contractions in each country again after German gross domestic product plummeted 3.5 per cent and French GDP shrank by 1.3 per cent in the first quarter.
As a result, GDP in the 16-nation currency bloc fell only 0.1 per cent in the last quarter, the European statistics office said, cheering economists who had expected a decline of 0.5 per cent after a drop of 2.5 per cent in the previous quarter.
The better than expected performance echoed that of the US economy, which shrank only 0.3 per cent in the second quarter. But the UK saw its GDP shrink 0.8 per cent, prompting criticism of the government’s handling of the economy.
“The size of Britain’s banking sector and the extent to which the government allowed debt and the housing bubble to grow left Britain particularly exposed,” said Vince Cable, treasury spokesman for the opposition Liberal Democrats.
Erik Nielsen, chief economist for Europe at Goldman Sachs in London, said: “If you look at the US and Europe, pretty much everyone had a better second quarter than expected a few months ago – with the exception of the UK.”
Suggestions that a government stimulus and a resurgence in global demand were boosting the economy may prove a timely aid for Angela Merkel, the German chancellor who faces an election next month.
Robust consumer and public spending, as well as renewed export demand appeared to help the eurozone’s largest economies grow 0.3 per cent in April, May and June, according to data from the German and French statistical offices.
The trends surprised economists, who had been expecting both economies to contract again – by 0.3 per cent - after German gross domestic product plummeted 3.5 per cent and French GDP shrank by 1.3 per cent in the first quarter. The euro gained against the dollar and the yen on the unexpected news and equity markets in Paris and Frankfurt were also higher.
Greece and Portugal also grew 0.3 per cent in the second quarter, while the Austrian and Belgian economies shrank 0.4 per cent, Italy’s 0.5 per cent and the Dutch economy by 0.9 per cent.
Eastern EU countries outside the eurozone again saw recession deepen.
Many economists said they expected the eurozone to swing back to growth in the third quarter, although they also warned that rising unemployment, fragile bank lending and the looming end to stimulus spending made for pitfalls.
Christine Lagarde, French finance minister, said: “France is distinguishing itself clearly from its neighbours.”
In Germany, economy minister Karl Theodor zu Guttenberg said the country had put its harshest recession since the second world war behind it.
Additional reporting by Chris Bryant in Berlin and Bertrand Benoit in Saarbrücken
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Though the French and German economies saw deeper recessions than the United States did, they have the benefit of not having a tremendous trade deficit like the United States. We will not know if this is the sign of recovery in the Western Eurozone until the next quarter, but the Euro markets have a long way to go. After the tremendous deficits run up by the French and German governments in order to keep their economies afloat, these next months are going to be hard regardless of recovery in these markets.
The UK on the other hand is running deeper into debt and their economy has seen no relief, which means that Cameron is pretty much a shoe-in (though I can no longer see any difference between Conservative and Labor politic).
Despite all of this, I believe us western countries must stop the "short time relief" for "long term harm" mentality, as we are focusing too much on an emergence from this recession and not the root cause of the global meltdown (our governments think it is because we did not regulate enough!).
By Gerrit Wiesmann in Frankfurt and Ben Hall in Paris
Published: August 13 2009 09:07 | Last updated: August 13 2009 19:25
The German and French economies unexpectedly bounced back in the second quarter, raising hopes that the worst of the economic crisis is coming to an end in the eurozone.
The region’s two biggest economies, which had each suffered four consecutive quarters of negative growth, both grew 0.3 per cent in the three months to the end of June, figures showed on Thursday.
The figures confounded economists who had predicted contractions in each country again after German gross domestic product plummeted 3.5 per cent and French GDP shrank by 1.3 per cent in the first quarter.
As a result, GDP in the 16-nation currency bloc fell only 0.1 per cent in the last quarter, the European statistics office said, cheering economists who had expected a decline of 0.5 per cent after a drop of 2.5 per cent in the previous quarter.
The better than expected performance echoed that of the US economy, which shrank only 0.3 per cent in the second quarter. But the UK saw its GDP shrink 0.8 per cent, prompting criticism of the government’s handling of the economy.
“The size of Britain’s banking sector and the extent to which the government allowed debt and the housing bubble to grow left Britain particularly exposed,” said Vince Cable, treasury spokesman for the opposition Liberal Democrats.
Erik Nielsen, chief economist for Europe at Goldman Sachs in London, said: “If you look at the US and Europe, pretty much everyone had a better second quarter than expected a few months ago – with the exception of the UK.”
Suggestions that a government stimulus and a resurgence in global demand were boosting the economy may prove a timely aid for Angela Merkel, the German chancellor who faces an election next month.
Robust consumer and public spending, as well as renewed export demand appeared to help the eurozone’s largest economies grow 0.3 per cent in April, May and June, according to data from the German and French statistical offices.
The trends surprised economists, who had been expecting both economies to contract again – by 0.3 per cent - after German gross domestic product plummeted 3.5 per cent and French GDP shrank by 1.3 per cent in the first quarter. The euro gained against the dollar and the yen on the unexpected news and equity markets in Paris and Frankfurt were also higher.
Greece and Portugal also grew 0.3 per cent in the second quarter, while the Austrian and Belgian economies shrank 0.4 per cent, Italy’s 0.5 per cent and the Dutch economy by 0.9 per cent.
Eastern EU countries outside the eurozone again saw recession deepen.
Many economists said they expected the eurozone to swing back to growth in the third quarter, although they also warned that rising unemployment, fragile bank lending and the looming end to stimulus spending made for pitfalls.
Christine Lagarde, French finance minister, said: “France is distinguishing itself clearly from its neighbours.”
In Germany, economy minister Karl Theodor zu Guttenberg said the country had put its harshest recession since the second world war behind it.
Additional reporting by Chris Bryant in Berlin and Bertrand Benoit in Saarbrücken
Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
http://www.ft.com/cms/s/0/4ed29388-87dd-11de-82e4-00144feabdc0.html?nclick_check=1
Though the French and German economies saw deeper recessions than the United States did, they have the benefit of not having a tremendous trade deficit like the United States. We will not know if this is the sign of recovery in the Western Eurozone until the next quarter, but the Euro markets have a long way to go. After the tremendous deficits run up by the French and German governments in order to keep their economies afloat, these next months are going to be hard regardless of recovery in these markets.
The UK on the other hand is running deeper into debt and their economy has seen no relief, which means that Cameron is pretty much a shoe-in (though I can no longer see any difference between Conservative and Labor politic).
Despite all of this, I believe us western countries must stop the "short time relief" for "long term harm" mentality, as we are focusing too much on an emergence from this recession and not the root cause of the global meltdown (our governments think it is because we did not regulate enough!).