Thursday 5 December 2019

Germany just escapes recession, France beats low expectations.

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

Stephen Brown and Ingrid Melander

Germany narrowly avoided recession in the third quarter of the year and France exceeded low expectations, putting the euro zone on course for anaemic growth but no contraction.

Europe's largest economy eked out 0.1pc growth from the previous three months, the German statistics office said, following a revised 0.1pc fall in the second quarter.

A strong rise in consumer spending and small boost from foreign trade prevented a worse result.

France expanded by 0.3pc on the quarter, beating forecasts for 0.2pc growth, marking its best performance in more than a year. But its second quarter was revised down to show a 0.1pc fall in GDP.

President Francois Hollande's Socialist government expects growth of just 0.4pc for the whole year, less than half its initial forecast, and has said it would miss a pledge to bring its public deficit down to 3pc of GDP next year.

The German government's panel of independent economic advisers cut its forecasts on Wednesday for growth in 2014 to 1.2pc from a previous 1.9. It did not expect any acceleration next year, pencilling in growth of just 1.0pc.

Spain has already reported steady 0.5pc growth and few if any of its peers are likely to better that.

"Activity has somewhat taken off but remains too weak to create the jobs our country needs," French Finance Minister Michel Sapin said in a statement, reiterating his call for more action to boost growth and jobs in Europe.

Italy and France have been pressing the EU to focus more on measures to boost growth rather than cut debt in order to prevent a slide back into recession. Germany, the country with the current account surplus to spend more, will not budge.

That debate is likely to flare back into life as G20 leaders gather in Brisbane for their annual summit this weekend.

US Treasury Secretary Jack Lew gave an unusually blunt assessment of what he thinks Europe needs to do this week, arguing that France and Italy should rein in budget deficits more slowly and that it was "critical" Germany and the Netherlands loosen their fiscal purse strings.

Germany's Chamber of Commerce DIHK urged the government to change course and go for a more business-friendly policy.

"That would help to lift the brake on investment," said DIHK managing director Martin Wansleben, responding to the GDP data.

Elsewhere Greece’s economic recovery appears to be underway as  the country has now posted three consecutive quarters of economic growth, according to official data released today.

The figures from the European Commission’s statistics office show that the Eurozone economy grew 0.2pc in the third quarter – an 0.8pc increase year on year.

GDP in the wider EU of 28 countries grew by 0.3pc in the third quarter.

Reuters

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