Monday 20 January 2020

Analysis: More needs to be done to boost recovery in Europe

Colm Kelpie

Germany's inflation rate may have fallen to its lowest level since 2010, but the 0.8pc rate is one of the 
healthier readings 
among the euro zone's 18 countries.

Things are worse elsewhere. The euro zone's largest economy appears to be one of the least at 
risk of deflation in the 
entire euro area. 
 But bad news from Germany - the bloc's economic powerhouse - can't be ignored. There are clear cracks in Europe's recovery, which has shown signs of struggling to gain momentum a year after exiting recession.

Investor sentiment in the country dropped to its lowest since December 2012 this week while Italy last week slipped into recession again, compounding Prime Minister Matteo Renzi's difficulties.

Unexpected

Industrial production across the euro zone fell unexpectedly in June.

High unemployment, sluggish reforms and the fallout from the conflicts in Ukraine, Gaza and Iraq are all holding the European recovery story back.

The International Monetary Fund (IMF) warned as recently as last month that any new shocks could halt the recovery, spoil improving market sentiment and eventually tip the 
region into deflation.

The Washington-based fund warned that the recovery remained too weak even after the efforts of governments to reform, the European Central Bank's actions to spur growth, and a clean-up of the financial sector.

It seems much work remains to be done.

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