Author Topic: Growth remains paltry despite series of tail winds in Eurozone Economy  (Read 210 times)

0 Members and 1 Guest are viewing this topic.

Offline internet police

  • Global Moderator
  • Hero Member
  • *****
  • Posts: 1482
    • View Profile

The 19-country eurozone is in its longest stretch of economic expansion since the global financial crisis in 2008 but growth remains paltry despite a series of tail winds and is susceptible to a reverse if the worst fears in financial markets come to fruition.
 
The region's economy grew by a quarterly 0.3 percent in the final three months of the year for the second quarter running, the European Union's statistics agency, Eurostat, said Friday.
 
Though the report contained few details on what drove the growth, information from individual countries suggests a rise in spending by consumers and governments offset the effects of waning global trade. That's certainly true for Germany, Europe's largest economy, where energy cost savings appeared to have buoyed consumers and the influx of refugees prompted the government to increase spending.
 
The question for 2016 is whether those over-arching domestic trends can offset the drag from outside the region. The global market turmoil of the past few weeks, largely stoked by worries over the Chinese economy, could seriously erode Europeans' sense of confidence and wealth.
 
If the markets are right, the economic outlook has darkened materially, raising fears that the eurozone recovery could swiftly go into reverse. The risks are heightened by the fact that many governments cannot spend much due to high debt and many banks ? not just in financially troubled Italy and Greece ? are still trying to get rid of bad loans. Even banks like Deutsche Bank, Germany's biggest, have been caught up in the market angst.
 
Still, the fourth-quarter increase means the eurozone has expanded for 11 consecutive quarters, its longest sequence since 2008, when the financial crisis brought the global economy to its knees. The fourth quarter rise also bested the 0.2 percent growth recorded in the U.S., according to Eurostat.
 
As a result, the eurozone economy ended last year 1.5 percent bigger, its highest annual expansion since 2011, when it bounced back from the savage financial crisis-induced recession.
 
The region's top three economies ? Germany, France and Italy ? saw unspectacular growth of 0.3 percent, 0.2 percent and 0.1 percent, respectively. Italy has become an increasing source of concern over recent weeks as its banks remain lumbered with a huge amount of bad loans that limit the ability of the financial sector to lend to the wider economy.
 
"The soft end to the year in several of the `core' countries is likely to cement concerns about negative spillovers from abroad,'' said Timo del Carpio, European economist at RBC Capital Markets.
 
It's not just the big economies stoking worries. Two eurozone countries also sank back into recession ? officially defined as two consecutive quarters of negative growth. Finland saw output shrink by 0.1 percent while Greece's contracted by 0.6 percent as the country's economy remains choked by a raft of controls on money flows introduced at the height of its latest fight with bankruptcy last summer.
 
One bright spot was Spain, where growth was 0.8 percent. Still, there are concerns even there that political uncertainty related to last December's inconclusive general election could start to weigh on the economy this year. And though unemployment in the country has fallen over the past couple of years, it's still high at over 20 percent and remains a brake on growth.
 
Overall, the eurozone as a whole has failed to generate much momentum over the past year or so despite the spending-boosting impact of lower energy costs, the export-generating fall in the value of the euro currency and the confidence-building stimulus from the European Central Bank.
 
And because inflation remains very low at an annual 0.4 percent and could drop below zero, many analysts think the ECB will do more at its next policy meeting on March 10. The big worry is that low, or negative, inflation rates become entrenched, causing economic stagnation as they have in Japan.
 
Analysts think the bank could add to its 60 billion euros ($65 billion) in monthly bond purchases through at least March 2017, a step which pumps newly printed money into the economy. It could also cut the rate on the deposits it takes from commercial banks from its current rate of minus 0.3 percent. The negative rate is aimed at pushing banks to lend money rather than hoarding it.
 
"With the exception of Spain, the fourth quarter growth rates are clearly frustratingly modest to a central bank that has taken repeated steps to stimulate growth and augurs for further policy action in March,'' said Chris Williamson, chief economist at financial information company Markit.



Loading...
 

Dubai to Press Ahead to build World Largest Mall as oil fall slows Gulf Economy

Started by yungcrux

Replies: 0
Views: 215
Last post February 10, 2016, 10:54:03 AM
by yungcrux
President Buhari Vows, We?ll use 2016 budget to diversify Nigerian economy

Started by admin

Replies: 0
Views: 200
Last post October 06, 2015, 11:49:15 AM
by admin
Nigeria Economy Collapsing Gradually, Civil service organizations Tell Buhari

Started by mastercode

Replies: 0
Views: 124
Last post October 29, 2015, 05:14:37 PM
by mastercode
Okonjo-Iweala assures of effective management of Nigeria?s economy

Started by admin

Replies: 0
Views: 307
Last post October 13, 2014, 06:12:14 PM
by admin
President Buhari to diversify Nigeria's economy from oil to agriculture, mining

Started by mastercode

Replies: 0
Views: 258
Last post May 12, 2015, 12:56:14 PM
by mastercode
Economy is ok in your absence, leave it with Osinbajo -Economist tells Buhari

Started by Postmaster

Replies: 0
Views: 342
Last post March 10, 2017, 05:03:15 AM
by Postmaster
Oil slump reveals structural defects in Nigerian economy

Started by jchima14

Replies: 0
Views: 242
Last post November 27, 2014, 09:08:51 AM
by jchima14
CBN boss reaffirms - Nigeria economy still strong

Started by legendguru

Replies: 0
Views: 573
Last post July 20, 2016, 01:49:38 AM
by legendguru
Nigeria FG To Revive, Sustain Economy Through Reforms

Started by Naijaloaded

Replies: 0
Views: 201
Last post May 10, 2017, 07:57:21 AM
by Naijaloaded
7 Strategies To Manage Assets in a Volatile Economy

Started by naij

Replies: 0
Views: 296
Last post September 18, 2017, 01:26:23 PM
by naij