A Bipolar Europe Unfolding as German Growth Powers Ahead: Part One

We may be hearing the phrase “Europe has some problems” (not for the first time), and the issue at stake is that strains are showing yet again in trying to contain multiple different economies, tax systems and business cultures into one pot.

While Greece, Ireland, Portugal and increasingly Spain grapple with high unemployment, low growth/even contraction, high levels of debt and an inability to raise finance at competitive rates, at the other end of the EU stand Germany and, to a lesser extent, France and the Netherlands, whose interlinked economies are powering ahead after a strong rebound in 2010. The German economy grew by 3.6 percent last year according to an FT article and is conservatively expected to hit 2.5 percent growth this year, possibly nudge 3 percent.

Source: Financial Times

Even France is forecast to grow at 1.5 percent this year, in part dragged along by German growth as the two economies are so interlinked both countries’ largest export market is the other. It’s what Andreas Rees at UniCredit in Munich calls the revival “of the good old Franco-German economic axis. Germany’s Ifo Institute said its business climate index hit 110.3 points in January, up from 109.8 the previous month and its highest level since it started tracking sentiment 20 years ago.

Source: Financial Times

The French statistics agency Insee said its manufacturing sentiment index jumped 6 points to 108, the biggest monthly rise since mid-1999.

(Continued in part two tomorrow.)

–Stuart Burns

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