Tuesday 25 October 2016

Eurozone expected to report solid growth as ministers meet for Greek talks

Published 11/05/2015 | 08:51

The European Central Bank in Frankfurt
The European Central Bank in Frankfurt

With optimism building that the United States is already recovering smartly from another horrible start to the year, focus will shift this week to reports that may show the euro zone is finally shaking off half a decade of torpor.

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The 19-member currency union has been a millstone around the global economy's neck ever since the financial crisis spawned a sovereign debt crisis particular to Europe.

China's economy is no longer driving growth and other emerging markets like Brazil are grappling with disappointing performance in the run-up to what most expect will be the first U.S. interest rate hike in nearly a decade later this year.

So it is all the more crucial for more than just its citizens suffering from years of high unemployment and feeble or no growth that Europe is able to pick up some of the slack.

Eurogroup finance ministers will meet todayto discuss once more Greece's sclerotic progress in implementing economic reforms in exchange for bailout funds as it gets dangerously close to running out of cash.

But policymakers have already played down hopes of major progress early next week, which leaves the spotlight on the first read of how quickly the euro zone and its component economies performed at the start of the year.

For the first time in many years, it seems clear that the euro zone performed not only better, but far better than the US, which almost certainly suffered a mild economic contraction in January-March.

Euro zone growth is forecast at 0.5pc, according to a Reuters poll of economists, which would even put it ahead of Britain, which consistently has been leading the biggest economies in Europe, not only in growth but employment.

Given that the European Central Bank only just began in March a €60bn-a-month bond purchase program of mainly sovereign debt, such growth data certainly would raise even louder cries that perhaps stimulus is not even required.

Germany, Europe's largest economy and the one that was most opposed to ECB bond purchases, is forecast to have grown 0.5pc. France, which has been the laggard among the big economies, is expected to grow 0.4pc.

Even Italy is expected to chalk up 0.2pc growth.

One thing that analysts seem in agreement on is that apart from Greece's seemingly endless fiscal troubles, many positive forces have lined up behind the euro zone in addition to the launch of massive amounts of monetary stimulus.


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