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Euro zone economy feels the heat

Tuesday, May 23, 2017 - 01:56

Businesses across the euro zone maintained April's blistering growth rate this month as firms struggled to meet growing demand, suggesting the bloc's economic momentum is sustainable for now at least. David Pollard reports.

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It's hot - and that's not just the work. Construction's moving at a blistering pace in Germany - as, at 0.6 per cent in Q1, is the economy. The IFO institute says firms are feeling 'euphoric' and hiring at their fastest rate in 20 years. Its latest reading on morale is at its highest - ever. (SOUNDBITE) (German) IFO ECONOMIST KLAUS WOHLRABE, SAYING: "The biggest driver is industry. Order books continue to fill, even from abroad. Construction is moving from record to record." There's confirmation from the latest PMIs. The composite for the whole euro zone at a six-year high. And that includes France. The IFO sensing a feelgood factor from Emmanuel Macron's recent election victory. (SOUNDBITE) (German) IFO ECONOMIST KLAUS WOHLRABE, SAYING: "The French vote has provided a tailwind - a signal that Europe isn't under quite so much pressure." And it may boost Angela Merkel's chances of winning a fourth term as chancellor in September's German election. If for Macron, the pressure isn't off just yet ... The new president seeking to unite left and right in a new party ahead of parliamentary polls next month. While - as the economy races ahead - the ECB too could face a vote - of market confidence. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "It does call into question the ECB president's assertion at the end of April that economic risks remain skewed to the downside. That assessment no longer appears credible and I think the longer that the ECB pushes that line, the less credible they become." Mario Draghi might respond with two words: Greece, and Italy. The first unable, still, to secure emergency funds as bailout talks stumble. The second in need of 'urgent' action on its fiscal health, according to a new warning from the European Commission. Some of the euro zone's building blocks not as solid, it seems, as the others.

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Euro zone economy feels the heat

Tuesday, May 23, 2017 - 01:56