The recent data from economic indicators reveals that Europe’s recovery is stalling as the EU28’s second biggest economy – France – is going through hard times, possibly even slipping into another slowdown and stagnation. Even the number one – Germany – is beginning to display first signs of a downturn while inflation is dangerously decreasing. Germany is more and more divergent from France but its inflation logged its minimum in the last four years at 0.9 points. Observers now even warn again of the danger of deflation. Only a month ago, EU Economic Affairs Commissioner, Siim Kallar, pointed out that a ”recovery had taken hold” despite successes in Southern Europe when all bailed-out economies – Portugal, Italy, and Greece – slowly exited their billion-euro rescue programs, thus putting the debt crisis behind them. Now, the focus point is turning to France.
Last week, the French official data showed that the economy had stagnated in the first quarter of 2014 and was facing a high payments deficit. Another study suggested that output was shrinking and the state statistics agency forecast weaker growth than anticipated for this year. Christian Schulz of Berenberg Bank says that “France risks getting left behind in the eurozone economic recovery”. Moreover, a new rise in joblessness was observed with the record of 3.388 million people being without jobs. Yet, even Germany started to follow a similar pattern as the main business climate index tumbled to a six-month low in June. Capital Economics’ Jennifer McKeown said that further decline in expectations suggested that companies had been unimpressed by the latest reactions of the European Central Bank. In her opinion, “these early signs of a slowdown are a disappointing indication that the eurozone’s main engine is sputtering long before the region’s spare capacity has been eroded.” She also added that this contributes to the mounting risk of deflation in the common currency zone.
