Eurozone 1 quarter away from recession

[toxicpiano 125]

Originally posted by: toxicpiano

Europe's major economies contract

One German company on being hit by the slowdown

The 15 economies of the eurozone contracted by 0.2% between April and June, heightening fears that the euro area is sliding towards recession.

The eurozone's first decline since it was created in 1999 was driven by a slowdown in exports and consumer spending.

The German economy, Europe's largest, shrank by 0.5% in the second quarter compared with the previous quarter.

And in both France and Italy GDP shrank by 0.3% in the second quarter.

The slowdown was less pronounced in the wider European community of 27 nations including the UK, which contracted by 0.1%.

The possibility that the European Central Bank is cutting interest rates in 2008 to support the sickening economy is remote Economist Jörg Radeke

However Estonia, where the economy contracted for the second consecutive quarter, is now considered to be in recession.

Ireland, whose economy contracted in the first quarter of the year, has not yet released its second quarter growth figures.

Compared to the second quarter of 2007, the eurozone economies grew by 1.5% and the 27 European Union countries grew by 1.7%.

The news weakened the euro, which was already well down from its recent highs against the dollar.

But high eurozone inflation, which was unchanged on the month, made it unlikely that the European Central Bank, which raised interest rates last month, will reverse its stance.

'Deterioration'

The figures reflect the way in which exporters have been affected by the strength of the euro, which makes their products more expensive overseas, and a more general slowdown in global demand.

French finance minister Christine Lagarde, said the decline in the French economy in the second quarter "mostly reflects the deterioration of our international context, which particularly weighed on our exports and which is common to all European countries".

"The fundamentals of the French economy are healthy," she added.

Meanwhile a German finance minister said its economy could contract again in the next quarter which would mean Germany was officially in recession.

"At the moment that cannot be ruled out," said deputy economy minister Walther Otremba.

'Orders down'

Germany was once seen as the main driver of growth in the eurozone.

However exporting companies, such as Berlin-based manufacturer Witels Albert, are cutting back after seeing orders decline in the last few months, especially from the US.

"There is a slowdown in the industry and one of the main reason is the rise in oil price," chief executive Horst Schneidersreit, told BBC News.

"We have seen this in our own company. Our orders have slowed down."

Despite the sharp slowdown in the second quarter in Germany, the government said it still expected GDP growth of 1.7% this year.

Spain was the only one of the major eurozone economies to see its economy expand between April and June. It grew by 0.1% compared with the previous quarter.

Inflation steady

Figures also released on Thursday showed that prices across the euro area rose by 4% in July compared to a year earlier.

The European Central Bank increased interest rates in July by 025% to 4.25% in a bid to combat rising prices.

The July figure is the same as June's inflation rate, but although the rate of increase is not quickening, economists said rising prices were still a concern.

"Although inflation has been stable at 4.0 % in July, it is still way above target," said Jörg Radeke from the Centre for Economics and Business Research.

"Hence, the possibility that the European Central Bank is cutting interest rates in 2008 to support the sickening economy is remote."

quote>

Bad times doth cometh.

[GMT 389]

its several reasons here that work together.

the us real estate crisis screwed up many banks and since most of them work worldwide in coops with other banks they got screwed aswell, some worse, some just bad, but all together it certainly harmed the finanical markets seriously.

then the energy costs add serious pain. ok, us crude oil is droppin each day, I think almost $55 in the last few weeks, but fuel prices (europe's energy prices in general) are either standing still or rising (if I take a look at local gas stations the prices rose 10 cent in the last 2 weeks although oil dropped several dollars/barrel, and for all this crap inflation rises.

This gives the ppl the feeling of not having enough money so they keep it safe at the banks.

in germany alone there's several billion euros on the bank depots (no material values like gold or real estates or stuff, *just money*), and ppl won't agree to spend it or at least parts of it, cuz they're used to keep some under the pillow for worse times, not knowing that this creates these "worse times" (or at least adds to their creation)

so one thing comes to another and... well

I don't think we face a recession, cuz most economies are still rising, just not as much as before, but the tendency is certainly there. But it's not yet too late to prevent a recession

[Mebert 5]

As a currency trader, let me give you all some advice.

Dump. The. Euro. Now.

And while you're at it, stay away from the Pound, Dollar, and Yen. Good currencies at the moment are the Russian Ruble, and the Czech Crown. Although, if you guys really want to keep your currency safe, there is one that has a very good record: the Ducat.

[krbe 193]

Originally posted by: GMT ok, us crude oil is droppin each day, I think almost $55 in the last few weeks, but fuel prices (europe's energy prices in general) are either standing still or rising (if I take a look at local gas stations the prices rose 10 cent in the last 2 weeks although oil dropped several dollars/barrel, and for all this crap inflation rises.quote>

Oil is usually bought on long term contracts, so the prices might lag somewhat behind the price of it straight from the ground. Plus, the operators might as well try to take advantage of the high prices, since their margins (on petrol) are next to nothing.

in germany alone there's several billion euros on the bank depots (no material values like gold or real estates or stuff, *just money*), and ppl won't agree to spend it or at least parts of it, cuz they're used to keep some under the pillow for worse times, not knowing that this creates these "worse times" (or at least adds to their creation)quote>

Money in the bank are traditionally being lent out, so that they aren't idle even though people are saving. And these rainy days they're being saved for can be hard to spot for the individiual, especially with fixed income and taxes, strict labour laws, etc. In addition to this it's very hard to grasp for the man on the street how such small segment as sub-prime mortgages could bring an entire industry to halt; and it really isn't their fault that the banks didn't know how to operate a calculator (and it shouldn't be their responsibility, neither as consumers nor tax payers&mdahs;but I believe Social Security is just fine as long as it's handing out to corporations?).

[belfastuniguy 18]

As a currency trader, let me give you all some advice.

Dump. The. Euro. Now.

And while you're at it, stay away from the Pound, Dollar, and Yen. Good currencies at the moment are the Russian Ruble, and the Czech Crown. Although, if you guys really want to keep your currency safe, there is one that has a very good record: the Ducat.quote>

Well to be honest financial traders are partly responsible for the mess and hysteria being created. Speculation in addition to constant media fear mongering is doing nothing to help the situation. I do not fear a recession, I haven't seen any major changes to my lifestyle, me finances nor that of my parents. Their business (property development) is doing very well in an economy still enjoying good levels of growth (Northern Ireland).