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16 May 2014
GDP figures in the euro area are worrying - BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ, assesses the recent GDP figures for some euro zone members.
Key Quotes
"The fears in the markets that the ECB may have fallen further behind the curve was triggered by the weaker than expected real GDP data yesterday. While the German GDP data impressed with an expansion of 0.8%, France stagnated, while Italy contracted by 0.1% and the Netherlands by a huge 1.4%."
"That was the largest contraction since the depth of the Great Recession in 2009. For Italy, the weakness in GDP is a worry."
"When coupled with low levels of inflation it means that nominal GDP growth in Italy remains well below what is required to reduce debt-to-GDP ratios. Even though Italy is running primary budget surpluses, overall budget deficits due to debt servicing means debt-to-GDP ratios will head higher".
"If very low levels of inflation were to persist in this low growth environment, at some point the danger is that the investor become concerned over sovereign credit again and that’s when periphery spreads in countries like Italy start to widen out again."
Key Quotes
"The fears in the markets that the ECB may have fallen further behind the curve was triggered by the weaker than expected real GDP data yesterday. While the German GDP data impressed with an expansion of 0.8%, France stagnated, while Italy contracted by 0.1% and the Netherlands by a huge 1.4%."
"That was the largest contraction since the depth of the Great Recession in 2009. For Italy, the weakness in GDP is a worry."
"When coupled with low levels of inflation it means that nominal GDP growth in Italy remains well below what is required to reduce debt-to-GDP ratios. Even though Italy is running primary budget surpluses, overall budget deficits due to debt servicing means debt-to-GDP ratios will head higher".
"If very low levels of inflation were to persist in this low growth environment, at some point the danger is that the investor become concerned over sovereign credit again and that’s when periphery spreads in countries like Italy start to widen out again."