Analysts already feared a bad quarter in Germany after the weak growth of the euro zone. However, the consensus was that the country's economy would lower its expansion rate from a still 0.5% to between 0.1% and 0.2%. The contraction has surprised the markets. A part of this deterioration is due to the temporary interruption of car production before due to the new emission regulations, which is a punctual effect. "We expected weak auto production to be partly offset by other sectors, but that does not seem to have happened," said Jennifer McKeown, chief economist for Europe at Capital Economics. Contrary to expectations, foreign trade gave way to trade wars and crises in emerging economies such as Turkey.
With a stagnant Italy and with the deposit in reserve, Spain (+ 0.6%) and France (+ 0.4%) pulled the car between June and September. In the case of France, the pace accelerated compared to the previous quarter thanks to the recovery in consumption. However, the euro zone has gone from being above the United States and the United Kingdom to stay far below. The North American economy was 0.9% in the third quarter, while the United Kingdom economy was 0.6% despite the fact that the doubts that have existed in recent months about the odds of a hard Brexit. According to Eurostat data, Germany and Lithuania are the only countries with negative data. The majority of Eastern European countries continued to advance above 1% in the third quarter, while Spain continued to lead the Western economies after the Netherlands and Portugal also noted the effects of the slowdown.
Commercial battle with the United States
Although the data of Germany has a specific component, it confirms the forecasts of the main organizations that the euro zone has entered a stage of moderation. This is indicated by the European Commission, the European Central Bank or the International Monetary Fund. The economy loses steam as the challenges become stronger. And these continue to come from everywhere: inside and outside.
Of the interior, especially of Italy, that yesterday maintained the pulse with Brussels by refusing to redo some accounts that, according to the Commission, they will overflow their deficit forecasts until they are more likely to register a budgetary mismatch of more than 3% of their Gross Domestic Product (GDP). And also from the United Kingdom, where May must convince her government, her party and her allies of the unionist party of Northern Ireland to move forward an agreement with the EU on Brexit that would allow a more leisurely withdrawal.
The threats, however, continue to come from outside as well. Germany is already suffering the side effects of the trade war between the United States and China and the crises of emerging economies, especially Turkey. And now, in addition, the president of the United States, Donald Trump, flirts again with the battle to Europe. If last summer his goal was the German car industry, his focus is now French wine. Through his Twitter account, the American president charged against Emmanuel Macron. "As for trade, France produces an excellent wine, but so does the United States. The problem is that France makes it difficult for the United States to sell its wines in France and charges large tariffs, while the United States makes it easy for French wines and charges small fees. It's not fair, this must change! "He threatened.
With all that cocktail, the big bags have started today with losses and the euro has continued to fall against the dollar. Also the debt markets have reflected those risks. The Italian risk premium has continued to climb to 316 basis points, a level that the Ministry of Finance considers unsustainable.