The eurozone “is on the brink of recession”, says Szu Ping Chan in The Telegraph. Output in the single-currency area shrank by 0.1% in the three months to the end of September, the first contraction since the 2020 lockdowns. Another fall in the current quarter would meet the technical definition of a recession – two consecutive quarters of shrinking GDP.
The “good news” is that the eurozone is “set to avoid a deep contraction”, says Balazs Koranyi for Reuters. The overwhelming sense is more of stagnation than a big recession. But that is cold comfort when growth catalysts are so hard to see. Europe has been hit hard by the energy price spike that followed Russia’s invasion of Ukraine, says Paul Hannon in The Wall Street Journal.
There has also been a post-pandemic slump in international trade, dealing a particular blow to Germany’s export-oriented manufacturers. On an annualised basis, eurozone GDP fell by 0.4% in the third quarter, even as US GDP soared by 4.9% in the same period.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Stronger US growth partly reflects greater government profligacy, say Valentina Romei and Colby Smith in the Financial Times. Washington ran a primary budget deficit of 9.4% of GDP in 2021, “more than double the level of the eurozone”. US households are thus splurging on the national credit card. But America also enjoys structural advantages as the world economy becomes ever more technology-dominated. There are no European equivalents of giants such as Amazon and Google. That didn’t matter so long as China kept buying German cars and Italian machinery. Germany was “a massive winner [from] globalisation the way it existed until 2018, but that type of globalisation now seems to be over”, says Christian Keller of Barclays Investment Bank. Protectionism is rising and China has established a lead in the electric-car industry.
Southern Europe outperforms the north
The pan-European Stoxx Europe 600 index enjoyed a strong start to the year as the continent escaped a widely feared energy crunch last winter. It is still up by 6.5% in 2023 but has gone nowhere since July as the German economy stumbles and the luxury boom that had propelled Parisian stocks cools.
This year has turned out to be better in Milan and Madrid than in Frankfurt and Paris, says Bastien Bouchaud in Les Echos. Shares in Italian banking giant Unicredit have gained 84% in 2023, with Spain’s Banco Santander up by 32%.
Italian and Spanish banks have been boosted by rising interest rates and unexpectedly strong growth. Italy’s GDP has risen by 3.3% since late 2019 and Spain’s by 2.2%. By contrast, Germany has grown just 0.3% in that time. After being lectured endlessly by German politicians during the euro crisis, southern Europe is finally enjoying a degree of “revenge”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Nvidia becomes the fourth biggest company in the world - should you invest?
Chipmaker Nvidia is riding the AI wave, and has overtaken Alphabet and Amazon in terms of market capitalisation. Have new investors missed the boat, or will the share price soar higher?
By Ruth Emery Published
Savings market heats up as providers boost rates - should you switch now for a better return?
In a surprising twist, more and more banks are now hiking their savings rates. Is it a good time to move your money and grab a better rate?
By Vaishali Varu Published
What's the secret of Manolo Blahnik's success?
Fashion maestro Manolo Blahnik shows little sign of slowing down at 81, and his company notched up a record financial year in 2022. What is the secret of his success?
By Jane Lewis Published
Michelle Mone's "tough year of pain"
Michelle Mone liked to portray herself as a working-class heroine who worked her way to the top through grit and determination. But her pedestal is built on sand.
By Jane Lewis Published
Trevor Milton, the Elon Musk wannabe, is jailed for fraud
The former CEO of Nikola, Trevor Milton, has been found guilty of lying about the development of the company's electric trucks.
By Jane Lewis Published
Directors should think twice before waiving limited liability
Should small-business directors ever provide a personal guarantee in return for bank finance?
By David Prosser Published
Why Russia's economy is doing better than predicted
Sanctions were supposed to strangle Russia’s economy, but it seems to be thriving. What’s going on?
By Simon Wilson Published
When will the general election be?
The general election is likely to be sometime in 2024 and Keir Starmer is the favourite to win.
By Emily Hohler Published
India's stock market success looks set to continue
India has been the world's fastest-growing major economy for two years running.
By Alex Rankine Published
Javier Milei is cutting the deadwood
As promised, Argentina’s new president is taking a chainsaw to the state, and it's exciting to see, says Bill Bonner.
By Bill Bonner Published