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Green light with some yellow spots

Lee Hopley August 13, 2009 09:30

This is how Mr Liikanen, Finish Central Bank governor, recently described the more positive economic picture emerging in Europe - presumably preferring a traffic light analogy to the usual 'green shoots'. There was some more good news from the eurozone today - GDP across the 16 economies contracted by a less than expected 0.1% in the three months to June. And after a year in recession, both Germany and France expanded by 0.3% over the same period - beating expectations by some margin.

Several commentators were quick to declare the recession over in the eurozone's two largest economie, with some going so far as to predict a strong rebound in growth in the third quarter. This could potentially be good news for UK manufacturers - a recovery in demand in the UK's biggest market could be just the boost manufacturing needs.

However, others are taking a more cautious view of the numbers. Both France and Germany have put in place significant stimulus packages this year, supporting both industry and domestic consumption - the generous cash for bangers scheme and support for short-time working being good examples. Some economists need a bit more convincing that the eurozone is ready for these measures to be withdrawn. With the ECB also formulating its exit strategy, the rug could yet be pulled from under some of the factors that supported growth in the past few months.

 

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