Euro zone eco­nomic mus­cle weak as global storm gath­ers

The Pak Banker - - FRONT PAGE -

BER­LIN: The euro zone econ­omy notched up mod­est growth in the fi­nal three months of last year, show­ing the bloc has lit­tle mus­cle to shrug off the globe's mount­ing eco­nomic prob­lems. Af­ter a week where stock mar­kets around the world plunged, the 19 coun­tries us­ing the euro failed to lift the gloom with data show­ing that growth of its gross do­mes­tic prod­uct was just 0.3 per­cent in each of the fi­nal two quar­ters of 2015.

This will add to pres­sure on the Euro­pean Cen­tral Bank to ramp up its 1.5-tril­lion-euro money print­ing scheme to buy chiefly govern­ment bonds when gov­er­nors meet in March. Hav­ing spent much of their fire­power, how­ever, op­tions are lim­ited. The pic­ture var­ied across the euro zone, which spans eco­nom­i­cally strong coun­tries such as Ger­many in the north to Greece or Por­tu­gal in the south, both of which re­quired fi­nan­cial res­cues. The bloc's big­gest mem­ber, Ger­many, posted steady eco­nomic growth in the fi­nal quar­ter of 2015, as higher state spend­ing to cope with an in­flux of refugees and con­struc­tion off­set a drag from for­eign trade.

Yet, Italy barely grew dur­ing the same pe­riod as do­mes­tic de­mand was slow. Eco­nomic out­put edged up a quar­terly 0.1 per­cent at the end of last year. "This is a weak re­cov­ery," said Carsten Brzeski, an econ­o­mist with ING. "The risk is that low growth means un­em­ploy­ment re­mains high and that anti euro par­ties gain mo­men­tum." The Euro­pean Union's sta­tis­tics of­fice Euro­stat said gross do­mes­tic prod­uct rose 0.3 per­cent quar­teron-quar­ter in the last three months of last year, the same as be­tween July and Septem­ber.

Year-on-year, the euro zone econ­omy ex­panded 1.5 per­cent, also as fore­cast by econ­o­mists. Yet the fi­nal six months of 2015 lagged the start. The data painted a bleaker pic­ture for Euro­pean in­dus­try, from car-mak­ing to min­ing. In­dus­trial out­put fell 1 per­cent month-on-month in De­cem­ber - a 1.3 per­cent year-on-year fall. This was worse than ex­pected by econ­o­mists who had pre­dicted a 0.3 per­cent monthly rise and a 0.8 per­cent an­nual in­crease in pro­duc­tion.

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