Eurozone growth slows in September: Data
BRUSSELS: Growth in the euro zone economy slowed in September but despite the monthly dip, it still expanded at the fastest quarterly rate in four years, a key business survey showed on Wednesday.
Data company Markit said the flash reading of its euro zone Purchasing Managers Index fell to 53.9 points in September from 54.3 points in August.
Despite the dip, the reading was still comfortably above the 50 points mark signifying expansion in the economy.
The readings “pointed to steady growth of the euro zone economy at the end of the third quarter,” Markit said.
Moreover, the average reading of 54 points over the three months to September was the highest seen since the second quarter of 2011, it added.
Markit said the outcome was positive overall but there was some concern that the pace of growth has not picked up, despite the best efforts of the European Central Bank.
The ECB has been carrying out a 60-billion-euro per month stimulus programme since March in an attempt to boost growth and ward off a dangerous spiral of falling prices.
“The September PMI surveys indicate a further steady expansion of the euro zone economy but there remains a worrying failure of growth to accelerate to a pace sufficient to generate either higher inflation or strong job creation,” Markit Chief Economist Chris Williamson said.
He said the PMI data pointed to a 0.4 per cent expansion of the 19-nation euro zone economy in the third quarter, the same rate as in the second.
Analysts have begun to speculate whether the ECB will have to step up its Quantitative Easing (QE) stimulus programme in the wake of the decision last week of the US Federal Reserve to hold off on beginning to raise interest rates.
Investors are worried that the Fed’s cited concerns about the slowdown in China and market volatility mean the global growth outlook is now much more cloudy than just a few months ago.
“The ECB would no doubt like to see more ‘bang for their euros’ as far as stimulus from their QE programme is concerned, but it’s debatable whether these numbers are weak enough to convince the central bank to take more aggressive action just yet,” Williamson said. Finance ministers of euro zone’s major economies renewed on Tuesday their commitment to curb multinational corporations’ tax avoidance and called for more consistent rules to reduce “harmful” tax competition.
Multinational companies have long been in the sights of European Union authorities because of the way they can legally reduce their bills by basing themselves in low-tax centres.
Ministers from Germany, France, Italy and Spain agreed that more coordination at EU level are needed to prevent corporations from shifting profits to countries where they pay lower taxes. “We need collective rules to tackle harmful tax competition and aggressive tax planning,” French Finance Minister Michel Sapin told European lawmakers in a joint hearing in the EU Parliament in Brussels.
His call was echoed by his counterparts from Germany, Italy and Spain. ‘‘Harmful tax competition increases profits in one state but compromises them in other states, preventing them from getting legitimate tax revenues,” Italy’s Finance Minister Pier Carlo Padoan said.
These calls come as Europe’s Economic Commissioner Pierre Moscovici is urging EU finance ministers to agree on sharing information about specific arrangements with corporations, known as tax rulings, at their next regular meeting on October 5.
Tax rulings provide companies with information about their future tax bills when they settle in a country.
“This in itself is neither illegal nor problematic but, if misused, tax rulings can facilitate or even encourage aggressive tax planning, resulting in a serious loss of revenue for member states,” Moscovici said in his blog.
The EU is investigating the tax arrangements of Amazon and Fiat in Luxembourg, Apple in Ireland and Starbucks in the Netherlands and may start new investigations. “Tax rulings should no longer be implemented to allow harmful tax planning,” German finance minister Wolfgang Schaeuble told lawmakers in the joint conference organised by a special committee set up in the European Parliament to tackle harmful tax rulings.
As a disincentive against future aggressive tax deals, Moscovici wants states to set up a mechanism next year to automatically exchange data on deals struck with corporations. He is also pushing for the disclosure of arrangements made up to at least 5 years ago. —Reuters