It’s euro zone third quarter GDP day and Germany and France are already out of the traps with the latter’s economy contracting by 0.1 percent, snuffing out a 0.5 percent rebound in the second quarter. Growth of 0.1 percent was forecast, not just by bank economists but by the Bank of France too.
Germany failed to match its strong 0.7 percent growth in the second quarter, but expanding by 0.3 percent – in line with forecasts – it is clearly in much better shape.
The Bank of France has estimated stronger growth of 0.4 percent in the final three months of the year but the euro zone’s second largest economy is a growing cause for concern. An OECD report on French competitiveness, released overnight, said it is falling behind southern European countries that have bitten the reform bullet.
The OECD warned that markets can turn quickly on vulnerable countries although with its deep and liquid bond market, France is somewhat protected in that respect. France’s labour and pension reforms are widely viewed as being timid and with Hollande’s poll ratings at record lows there is not much chance of a great leap forward.
Spain has been much more aggressive and is seeing the benefits in terms of rising exports (and, admittedly, sky-high unemployment). So too has Portugal.