Home Business Euro zone economies’ plucky fourth-quarter belies troubled progress outlook By Reuters

Euro zone economies’ plucky fourth-quarter belies troubled progress outlook By Reuters


© Reuters. The unfold of the coronavirus illness (COVID-19) in Germany

By Paul Carrel and Leigh Thomas

BERLIN/PARIS (Reuters) – Progress in Germany and Spain and a smaller-than-expected contraction in France pointed to resilience within the euro zone economic system within the last three months of final 12 months, however the brilliant spot belies a extra troubled outlook for the bloc.

In Germany, sturdy exports helped Europe’s largest economic system eke out 0.1% progress within the fourth quarter, staving off contraction regardless of a second wave of the brand new coronavirus slamming the brakes on consumption, information confirmed on Friday.

France, the euro zone’s second-largest economic system, shrank 1.3% within the last three months of 2020 after the nation entered a second coronavirus lockdown in October to include a second wave of infections.

Spain achieved timid quarterly progress of 0.4%. However that has not stopped Spain from recording its worst-ever annual financial contraction, with output falling 11% from 2019’s degree, official information confirmed.

“Numbers for Germany, France and Spain confirmed that GDP was comparatively resilient in This autumn,” Nicola Nobile at Oxford Economics wrote in a analysis notice. However he added, “there aren’t many indications that this dynamic may have continued in Q1.”

“All in all, the disappointing vaccine roll-out thus far, the extension of restrictions in lots of European international locations and the most recent information now level to continued weak spot within the eurozone over the approaching months.”

The French hunch, which adopted an 18.5% rebound within the third quarter after a primary lockdown, beat expectations for a 4% contraction on common in a Reuters ballot of 28 economists, surpassing even the best estimate of -1.4%.

However France is on tenterhooks to search out out within the coming days whether or not the federal government will put the nation beneath a brand new lockdown and particularly whether or not faculties will likely be closed.

In Germany, Chancellor Angela Merkel and state leaders agreed final week to increase a lockdown till mid-February because the nation, as soon as a job mannequin for combating the pandemic, struggles with a second wave and document every day numbers of COVID-19 deaths.

On Wednesday, German authorities slashed its progress forecast to three% this 12 months, a pointy revision from final autumn’s estimate of 4.4%, attributable to a second coronavirus lockdown.


The financial outlook throughout the 19-country euro zone is being muddied by a row between the European Union and Anglo-Swedish agency AstraZeneca (NASDAQ:) over its provide of vaccines to the bloc, and by the return of inflation in Germany.

The Worldwide Financial Fund mentioned this week the euro space is more likely to slip behind the US in its restoration.

“Restoration paths differ throughout the group, with the U.S. and Japan projected to regain end-2019 exercise ranges within the second half of 2021, whereas within the euro space and the UK exercise is predicted to stay beneath end-2019 ranges into 2022,” the IMF mentioned in its in its World Financial Outlook.

The AstraZeneca provide problem is a blow to Europe’s COVID-19 vaccination drive, and the German inflation spike – client costs turned optimistic and rose in January to 1.6% on the 12 months – provides to a fancy combine of information for the European Central Financial institution to evaluate.

ECB information launched on Friday confirmed lending to euro zone firms picked up final month although the bloc was most likely again in recession and banks mentioned they have been tightening entry to credit score amid worry of defaults amid a recent wave of lockdowns.

The ECB is unlikely to chop its already-record-low coverage as a result of that might do little to revive the pandemic-hit euro zone economic system, 5 sources informed Reuters, taking part in down concern a few robust euro.

Merchants have been left scratching their head this week when Dutch central financial institution governor Klaas Knot mentioned the ECB “had room” to push its Deposit Facility Charge, presently at minus 0.5%, additional beneath zero if wanted to stem a rally within the euro .

The sources mentioned Knot had raised the speed lower problem on the ECB’s coverage assembly final week however the dialogue was “marginal” and never thought of a part of the ECB’s coverage technique, which is now focussed on bond purchases and low-cost loans to banks.

“ECB communication could possibly be such a robust device however is admittedly very complicated,” BofA analysts mentioned in a analysis notice.