Eurozone finally showing signs of recovery
Print Edition
MORIBUND. Decrepit. Sclerotic. Popular words to describe the economy shared by the 19 countries of the eurozone — but perhaps no longer apt.
Very slowly — and primarily because of massive stimulus from the European Central Bank — the eurozone is showing signs of recovery. It is a dawn that policymakers are struggling to nurture into broad daylight.
It also may not be felt equally across the board, viz Spain and Greece's unemployed versus Germany's busy builders.
But putting aside that the eurozone's nascent recovery is happening just as financial markets are unhinged, the numbers look generally positive.
Economic growth was running at an annual rate of 1.6 percent in the third quarter. While this may not seem robust, it is roughly twice the average annual growth rate between 2003 and 2014 (itself dragged down by the sharp contraction of 2009), and the equal highest rate since 2010.
So, for the eurozone, reasonably good. ECB forecasters and economists polled by Reuters expect it to grow slightly faster this year at around 1.7 percent.
Other data — though sometimes mixed — also point to a stronger-than-advertised economic performance.
Unemployment has been falling fairly steadily. It was at 10.5 percent in November, which is high, but the lowest in more than four years and well below the 12 percent of 2013.
Consumer confidence is on the rise and economic sentiment is at a more than four-year high. Manufacturing, as measured by purchasing managers' indexes, rose firmly into expansion in 2015, albeit still shy of its 2013 peak.
But given where the eurozone has been — and the many prophets of its political and economic doom — its relative improvement is being noticed.
"The world’s third largest economic bloc is actually doing rather well," said Andrew Milligan, head of global strategy at Standard Life Investments, which is favoring European equities, bonds and property in its portfolios as a result.
“A number of drivers are supportive,” he said, listing “monetary and fiscal policy, a healthier banking system, better real wages growth helped by lower energy costs, and demand as consumer confidence improves in those countries that have had a hard few years.”
The danger is that it could all be knocked down in a second by what the finance minister of non-eurozone Britain, George Osborne, has dubbed a “dangerous cocktail” of threats to the world economy.
Chief of these is the economic slowdown in China, which is the European Union's second-biggest trading partner behind the US. China and the EU trade around 1 billion euros (US$1.1 billion) between them a day, said the European Commission.
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