A Two-Speed Euro? Not a Good Idea

In an article in the Financial Times, this morning (see here), Joseph Stiglitz suggests a two-speed euro area. There are two points in this article: One is the usual bashing of the euro as a very bad idea, the second is on the necessity of a two-speed Eurozone from the current situation. The main reason is associated with the absence of adjustments between countries that do not go at the same speed and with very different characteristics. Therefore the dynamics is far from optimal leading to a very inefficient situation according to Stiglitz.

A two-speed euro is not a good idea as I think that it would be the end of the Euro Area. Continue reading

A lower momentum for the Euro Area during the second quarter

GDP growth for the Euro Area was confirmed at 0.3% (flat) for the second quarter of this year (2.2% at annual rate).
The table below shows growth figures for different countries of the Euro Area.
In the largest Eurozone countries there is a slowdown during the second quarter. This is the case for Germany (from 2.9% to 1.7%), for France (+2.7% to -0.2%) for Spain (from 3.1% to 2.8%) and for Italy (from 1.1% to 0%) Growth is stronger in other countries.
Carry over for 2016 at the end of the second quarter is 1.3% for the Euro Area but 1.5% for Germany and 2.6% for Spain; but just 1.1% for France and 0.6%% in Italy. For other countries it is circa 1% except for Greece where it is still negative. Continue reading

Benchmarks after a vacation period

After a vacation period we all need to look at economic indicators to refresh our perception of the economic outlook. I propose a series of graphs with rapid comments.

Point #1Growth momentum was low in France and in the US during the second quarter.
In France, GDP was marginally down during the second quarter (-0.04% flat and -0.2% at annual rate). In the US, it was up by only 0.3% (flat) (1.2% at annual rate).
For France, this sudden stop is linked to private demand. Its contribution during the first quarter was at 3.6% at annual rate. It was negative at -0.1% during spring. Households’ expenditures slumped with a contribution that was null in Q2 after +2.5% during the first three months of 2016. Corporate investment has had a negative contribution at -0.1% after +1.1% during the first quarter.
The government forecast for 2016 is at 1.5%. It is now an ambitious target as it will be necessary to have a growth number at 0.55% (2.2% at annual rate) during the third and the fourth quarters. We don’t see where this spike would come from. It can work during one quarter, as it was the case during the first quarter of this year, but we cannot expect, for the French economy, two consecutive quarters above its potential growth trend Continue reading