At first glance, the eurozone economy seems like it might finally be on the mend.
- True, according to some estimates, the eurozone economy may now be growing at an annual rate of 1.6%, up from 0.9% in the year to the fourth quarter of 2014.
- With the eurozone economy 2% smaller than it was seven years ago, “Recovery” does not feel like the right word – especially as the relief is unlikelyto last.
- With eurozone exports increasingly reliant on global supply chains, a cheaper currency provides less of a boost than before.
- In 2014, exports from the eurozone amounted to nearly €2 trillion – more than those from China.
- In any case, with exports accounting for only one-fifth of the eurozone’s €10trillion economy, they are unlikely to spur a strong recovery while domestic demand remains weak.
- Quantitative easing does improve funding conditions for the few eurozone companies large enough to tap capital markets.
- Most businesses in the eurozone rely on bank finance, and while credit conditions have improved somewhat, lending is flat.
- Nor can the small uptick in the eurozone’s growth, much less the relatively rapid expansion in Spain and Ireland, be attributed to the German recipe of fiscal consolidation and measures to increase export competitiveness.
- The eurozone economy is set to do a bit better in 2015, but not because of the policies demanded by Germany.
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- 69The European Debt Crisis Visualized http://www.bloomberg.com/