The Eurozone’s two biggest economies have shown clear signs of coming out of recession. Defying forebodings, both France and Germany have officially posted 0.3 percent growth from April to June, after four consecutive quarters of shrinkage.
But economists have warned against excessive optimism, pointing to the clear and present threat of rising unemployment. The euro zone as a whole contracted by 0.1 percent in the second quarter, showing that the roughest economic down-turn since the Second World War may have more punishment in store.
Analyst Marc Touati said: “The French and German upswings are merely technical. The follow-on might not materialise. What fuelled the growth was a weaker euro, the drop in interest rates and the budget recovery plan. All of these effects today are petering out.”
The statistics show that increased consumption has helped matters, plus construction and foreign demand. However, the experts point to the impact of government subsidies to boost car sales fading, which could mean empty order books on the horizon. The pundits say if companies lay people off this autumn, the subsequent dent in wages could erode consumption.
The European Central Bank says the global recession has touched bottom, yet that the rest of this year’s economic activity in the euro zone will still be weak. And so for the time being it plans to keep the cost of borrowing money in the euro countries near one per cent.