Euro BOMBSHELL: How Germany and EU giants BOOM while weaker nations SUFFER

0
42


Neil Wilson of Markets.com claims eurozone nations are each “in their own cycle” as he suggested there is a disparity in fiscal stimulus and economic security within the 19 nations who have adopted the euro. He goes on to claim how the euro is beneficial for countries who are deemed stronger financially, such as Germany, a nation who has the largest economy in Europe, compared to those who are struggling with debt. Several nations within the bloc have expressed financial strain in recent years, from the Greece debt crisis which resulted in the cash-strapped nation being bailed out three times, to Italy’s struggle with the European Commission over its spending habits. Germany has been dented in recent months with its manufacturing sector taking a hit from the US-China trade war and weakening demand for cars.

But even when the economy was at its best, Mr Wilson said this strength did not radiate through weaker countries across Europe.

Mr Wilson said: “I think Germany is still the powerhouse, of course.

“The problem is that German strength does not necessarily translate into strength for Portugal, Italy, Slovakia or whatever.

“Each is in their own cycle. They’re not all in it together – my view is that the single currency is a massive boost for Germany and a drag for many others, like Italy.”

READ MORE: EU CAVES IN – Embarrassing U-turn after Brexit market block on UK sparks investor FURY

Last month, German economy minister Peter Altmaier lowered the nation’s growth forecast for 2019 to 0.5 percent.

This is down from an already lowered estimate of 1.0 percent, while initial gross domestic product (GPD) growth expectations for this year were once as high as 1.8 percent.

However, the German government is insisting momentum is expected to pick up in 2020 where growth of 1.5 percent is expected.

Mr Wilson said a weaker German economy could make the European Central Bank (ECB) stand and pay attention to weaker eurozone economies by forcing it to look at widespread fiscal strategy.

He said: “If anything a weaker German economy would at least make the ECB more likely to turn more accommodative which would be good for the weaker eurozone economies.”

The European Commission this month said in a quarterly economic forecast for the EU’s 28 countries that eurozone GDP would grow 1.2 percent this year.

This is slower than 1.3 percent seen in February, and well below the 1.9 percent growth in 2018.

But the Commission expects the economy to rebound in 2020 to 1.5 percent.

READ MORE: Germany DEMANDS shock £4.6BN buffer from banks – fears for Merkel’s spluttering economy

Hetal Mehta, Senior European Economist at Legal & General Investment Management, said she sees a low probability of a recession brewing in the euro area.

She said: “The German manufacturing sector has been bombarded with shocks such as the new emissions testing procedure for cars, a China economic slowdown and trade war concerns.

“And yet the services sector – the larger part of the economy – has been ticking along well, underpinned by low unemployment, increasing wages and even some fiscal support.

“For the euro area as a whole, growth is likely to stay in line with its trend (1.0 to 1.5 percent), as many of the tailwinds giving growth of two percent or higher (QE, low oil, strong global growth) have faded.

“We see a low probability of a recession in the euro area. Inflation remains a key concern for markets.

“The ECB has failed to achieved its mandate and talks of higher interest rates lack credibility.

“Restoring this credibility will be a key challenge for Draghi’s successor.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here