France – not Greece - drags down Eurozone growth, pointing to broader economic problems
According to data released today by Eurostat, GDP in the Eurozone grew by 0.3% quarter-on-quarter in the April-June period. This is a slowdown from 0.4% quarter-on-quarter growth in Q1 2015. Compared to the second quarter of 2014, the growth rate stands at 1.2%.
Individual performance by Eurozone economies was varied. Germany fell short of expectations with 0.4% growth during Q2 – only marginally above Q1’s disappointing 0.3%. After expanding 0.7% in the first quarter of the year, the French economy flatlined. Italy slowed to 0.2% quarter-on-quarter. Meanwhile Spain, another economy particularly hard-hit by the crisis, continued on its steady upward trend posting 1.0% growth in Q2. Perhaps the greatest surprise in this week’s data came from Greece. The crisis stricken country posted 0.8% quarter-on-quarter growth with an upward revision to 0.0% in Q1.
Today’s mixed results come amid an increasingly uncertain global picture. As the European Central Bank’s (ECB) governing council pointed out in its mid-July meeting, external risks to Eurozone growth have intensified. Given China’s crucial role in global trade, the country’s apparent slowdown may have a larger than initially expected impact on European economies. Additionally, Cebr expects the US Federal Reserve to raise interest rates in December. The move may stifle growth across emerging markets, creating further challenges for sectors, such as German car makers, that are greatly exposed to these countries. A closer inward-looking check also reveals areas of concern within the Eurozone itself. The negotiations for a third Greek deal appear to be on firmer footing now than a few weeks or months ago. However, the entire process seems to defy the ‘what doesn’t kill you, makes you stronger’ adage and has left tension in inter-Eurozone relationships.