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New growth warnings over euro zone

Thursday, September 22, 2016 - 01:46

The German economy will lose steam in the second half of 2016 as weaker foreign demand causes industrial output to slow. As David Pollard reports, the warning from the Finance Ministry is another sign that Europe's biggest economy is set for a slowdown at a key time for Europe.

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After a round of state elections and with a federal vote on the horizon, Germany's politicians will be talking up the economy. For now, its finance ministry is talking it down. Growth will slow in the second half, it's warning - amid weaker foreign demand. Even if domestic demand is strong. SOUNDBITE (English) IHS GLOBAL INSIGHT, DIRECTOR OF SOVEREIGN RISK, JAN RANDOLPH, SAYING: "Wages are going up, the inflation rate is next to zero, and they're also making savings from energy. I think all that adds up to bigger consumer spending and we're seeing that as the big engine now for growth for Germany rather than just exports." Elsewhere, a reminder of another political challenge. Brexit: European parlimanet president Martin Schulz talking of the need for speed in Britain's exit negotiations with Europe. UPSOT (German) MARTIN SCHULZ, PRESIDENT, EUROPEAN PARLIAMENT, SAYING: "It's extremely complicated ..." 'It's extremely complicated' - he said - but the talks must be concluded by a 2019 deadline. But before that, voters go to the polls across Europe - and in Germany itself. Chancellor Merkel's future seen hanging in the balance of a fierce migration debate. SOUNDBITE (English) IHS GLOBAL INSIGHT, DIRECTOR OF SOVEREIGN RISK, JAN RANDOLPH, SAYING: "The euro zone crisis has morphed from debt, to growth, and now to politics. Not just the refugees, but Brexit is an existential challenge for the EU, and therefore for Merkel first and foremost." A time then for a new approach, according to some euro watchers. (SOUNDBITE) (English) CHIEF ECONOMIC ADVISER, CEBR, VICKY PRYCE, SAYING: "What you really need is a complete rethink about what to do with debt and how to get out of it. QE continues, quantitative easing may be the one answer. But restructuring, rethinking is one. Focussing on growth has to be other." But the ECB has also issued a new warning of the risks that Brexit and China still pose to the global economy. Harnessing growth the one thing Europe's politicians still can't quite achieve. ////////////////////////////////// 4111-EU-SCHULZ/ For much of Europe it's the so-called elephant in the room. Brexit the thing that could still trample over Europe's fortunes. One reason to tie up an exit deal as soon as possible perhaps - by 2019 at the latest, according to Martin Schulz. BITE SCHULZ But before that voters going to the polls across Europe - and with a referendum in Italy - all before that, there's a growing sense of Europe /////////// "The notoriously frugal German spenders, high savers, have decided that, well, with low unemployment, job security or apparent job security and getting nothing out of the banks in terms of interest, now is the time to spend on big-ticket items, and they seem to be doing so." ///////////////////////////

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New growth warnings over euro zone

Thursday, September 22, 2016 - 01:46