The two largest eurozone economies – Germany and France, have both published negative economic news. The fragile growth slows down. In the second quarter, German economy fell by 0.2% compared to the first quarter. Compared to the second quarter 2013, Germany grew by 0.8%, but it is lower than the anticipated 1.5%. Comparable data for France show, that the second eurozone economy stagnates. This will result in lower growth this and next year, which will further translate into problems with the fiscal deficit. The 3.8% of GDP level programmed for this year will surely be missed and next year´s numbers counting on 1.7% GDP growth are not realistic either.
Also the eurozone´s industrial output faces a slowdown. The production slumped by 0.3%, but was positive in both France and Germany, but the numbers were dragged down by Spain and the Netherlands. The European Commission reported that 2014 would be the year of the renewed economic growth. The new numbers show rather a stagnation – the expected growth is around 0.2%. The extremely low inflation, that the ECB is still unable to tackle effectively, together with the sanctions imposed on Russia does not help either. Pressure on the ECB to employ quantitative easing, as the US Federal Reserve has done earlier, grows and Mario Draghi, the ECB President, announced that this extreme measure will be used once the EU falls back into recession.
2nd May 2018