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Currency Analyst since 2010

Euro area's economy stagnates

FXBAZOOKA.com - The euro area’s recovery halted in Q2, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine. This may increase pressure on the European Central Bank to expand stimulus.

German GDP contracted by 0.2% after gaining 0.8% in the first 3 months of the year, while French economic growth stagnated and Italy’s unexpectedly fell into recession.

Bloomberg reports that the decline in German economy was largely due to a warm winter that shifted production to earlier months. Still, the outlook is now clouded by the impact of international sanctions against Russia over its support of separatists in Ukraine.

As for France, the failure of its economy to grow for a second straight quarter made the government abandon its 2014 deficit targets. French authorities now believe that the nation’s full-year growth will account for 0.5% instead of 1%, while the deficit in 2014 will exceed the 4% limit of GDP agreed less than 4 months ago with the European Commission. Finance Minister Michel Sapin blamed European policy for the lack of expansion in Europe’s second-biggest economy.

 

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