After European Central Bank chief Mario Draghi managed to bring his
colleagues into line to sign up to his 1 trillion euros or so target to
push into the ailing euro zone economy, today sees a raft of third
quarter GDP reports which are likely to show just why more help may be
needed.
The German and French figures are just out and while they don’t make pretty reading they could have been worse.
Germany narrowly avoided recession, growing by just 0.1 percent in
the third quarter of the year having shrunk a revised 0.1 percent in the
second quarter.
France grew 0.3 percent in Q3 after a downwardly revised 0.1 percent
contraction in Q2. President Francois Hollande’s government expects
growth of just 0.4 percent for the year, less than half its initial
forecast.
Spain has already reported reasonable 0.5 percent growth on the
quarter and few if any of its peers are likely to better that. S&P
is due to review Spain’s credit rating today.
Reuters polling has produced a consensus forecast of 0.1 percent
growth in the euro zone as a whole, matching the paltry second quarter
performance. We will know at 1000 GMT.
Paris and Rome 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 and to buy them time to push through structural economic
reforms. Germany is not keen.
That debate is likely to flare as G20 leaders gather in Brisbane for
their annual summit. U.S. Treasury Secretary Jack Lew gave an unusually
blunt assessment of what he thinks Europe needs to do this week, saying
France and Italy should rein in budget deficits more slowly and that it
was “critical” Germany and Netherlands loosen their fiscal purse
strings.
With the Bank of Japan, and to a lesser extent the ECB pursuing
expansionary policies which should have the by-product of weakening the
yen and euro, are we entering a new era of competitive
devaluations? It’s too early to cause a big row just yet – not least
because the rest of the world has urged Japan and Europe to do more to
reflate their economies. But it bears watching.
The Swiss franc hit a 26-month high against the euro this week,
inching closer to the Swiss National Bank’s cap, which it has pledged to
hold since Sept. 2011. It has generally done so without needing to
intervene. It may soon have to show its mettle.
The Scottish National Party’s annual conference begins today. The
party faces the unusual position of having seen its support soar since
it lost the independence referendum in September. So strong is its
resurgence that it threatens to take any number of UK parliamentary
seats from Labour at next May’s general election, imperilling its
chances of taking power.
Alex Salmond, who resigned as leader after the referendum defeat, has
suggested the SNP could support a Labour government in Westminster but
could not join a coalition dominated by the Conservatives.
In Australia for the G20 summit, Britain’s David Cameron has
threatened Russia with further sanctions after NATO said Russia had sent
more troops into eastern Ukraine. European Union foreign ministers meet
in Brussels on Monday but German Chancellor Angela Merkel has ruled out
further economic sanctions for now. No decision is likely until EU
leaders meet for a summit in mid-December.
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