Eurozone Posts Best Growth For 10 Years

Wednesday, 31 January 2018 20:00

The Eurozone refers to the 19 EU members that share the common currency of the Euro. In a strict sense, it has no economy since it is a currency union made up of the 19 national economies which all reflect individual strengths and weaknesses, however, that has never stopped anybody from talking of the Eurozone economy as if it were a national economy. With that in mind, the Eurozone economy has now managed to post its best economic performance since before the storm clouds of the Global Financial Crisis gathered back in 2007.

The Eurozone economy posted growth for 2017 of 2.7%, a level not matched in a decade since the bloc’s economy managed growth of 3%. The figure relates to a year-on-year comparison for Q4. The data, from Eurostat, indicates that the bloc grew at 0.6% in the final quarter of 2017. The Eurozone is now one of the strongest economies making up the global economy. The growth figure for the EU economy as a whole came in at 2.5% (including the 9-member states which do not use the Euro). The size of the EU economy is approximately $20 trillion, making it the second largest economy behind the USA. The economic growth enjoyed by the Eurozone is currently twice that seen in the UK which is the second/third largest economy in the EU (on a par with France, a Eurozone member).

The relatively robust growth data will make it more likely that the ECB will rein-in its QE activities. That process is underway with QE asset purchases being cut from €60 billion to €30 billion a month from this month. The bank has indicated that its QE activities will continue until September (at the earliest).

Currently, the ECB interest rate is at zero and it charges financial institutions -0.4% on monies they deposit with the bank. Ultimately, the ECB, like other central banks, will need to unload its asset portfolio without creating a Bear market and (theoretically) cancel the electronic money it created to pay for the purchases. Whilst it might be tempting to leave this money in circulation, it creates a real risk of triggering hyper-inflation should investors lose trust in fiat money – the experiment of printing money has been tried with disastrous consequences in the Weimar Republic which, arguably, led to the second World War.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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