It seems certain that the Greeks will go to the polls again in a few weeks to try to elect a party with a clear enough mandate to govern. This means that the Euro is likely to have a turbulent few weeks as investors consider the consequences of a Greek withdrawal from the Euro – if that’s the upshot of the Greek choice or a final loss of patience on behalf of Greece’s Eurozone partners.
However, as they say, life goes on. Earlier this week, Germany published its preliminary Q1 2012 data. The performance saw the German economy grow by 0.5% on the back of stronger domestic demand and better export figures. Given that Germany is the engine behind both the Eurozone and the wider EU, this is good news.
Eurostat, the EU’s statistical agency has just released Q1 data for the Eurozone. On the back of the German figures, the wider Eurozone has managed to avoid a technical recession (defined as two (or more) consecutive quarters of negative economic output), but only just. The bloc of 17 nations posted a quarterly growth figure of zero – since the economy of the bloc didn’t actually contract, they have avoided the spectre of a double-dip recession for at least another six months.
The German economy stood on the positive side of the balance sheet; the second largest Eurozone economy, France, produced neutral growth; the Italian economy endured its third straight quarter of recession with its economy shrinking by 0.8%. Beleagured Spain did quite well in the circumstances with its economy shrinking by 0.3% over the quarter. This is a very impressive performance when judged against the bad boy of the group’s achievement: Greece slipped further into the mire with its economy contracting by 6.2% in Q1.
The Euro has continued to lose ground against other major currencies, but this at least confers an advantage on Eurozone exports by making them more attractive: on the other side of that see-saw, the cost of imports such as oil and gas rises of course. The market is still pricing-in the cost of the Greek situation whilst the future of the nation within the bloc is still in the balance. Whilst many Greeks want to see the austerity measures strongly curtailed (if not totally abandoned), most Greeks want the country to remain in the Euro.
At the ECB fixing point on Wednesday, EUR:USD stood at 1.2738, weaker by 0.8%. It has not been lower since mid-January when the second EU/IMF bailout was being hammered out. It weakened by 0.1% against the Yen; EUR:JPY 102.53. The Euro also weakened by 0.1% against Sterling – GBP:EUR stood at 1.2512.





