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Is the Euro Zone out of the woods?

Thursday, August 15, 2013 - 02:04

Aug. 16 - After a week of promising data, are the euro zone's troubles over? Despite the glimmer of hope, analysts fear a weak and uneven recovery, as Ciara Sutton reports.

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Keep the champagne on ice - say analysts, warning over the euro zone recovery. Positive headlines have been splashed around the region after better than expected data shows the bloc is out of recession. Stronger growth in the euro zone's two largest economies, Germany and France, helped the region emerge from its longest ever recession in the second quarter. But Barclays' Will Hobbs says current political headwinds still threaten the recovery. (SOUNDBITE) (English) BARCLAYS, VP RESEARCH, ECONOMICS & STRATEGY, WILL HOBBS, SAYING: "You've got the ongoing soap opera in Italy, whether Silvio Berlusconi will relaunch his political career or whether he's going to be under house arrest. And you've got the party funding scandal in Spain that seems to be dragging on. And German elections ahead could cause some volatility. Along side all that, it really is only one quarter of more positive data after 18 months of contraction. So you should be wary about celebrating just yet. " The euro zone's trade surplus widened in June from a year earlier as imports continue to fall - revealing the uneven nature of the recovery. And Angela Merkel's upcoming election is also causing uncertainty. Chris Beauchamp is market analyst at IG. (SOUNDBITE) (English) CHRIS BEAUCHAMP, MARKET ANALYST, IG, SAYING: "It's the big unknown, we're all waiting for this at the moment and clearly once you see the elections out of the way we might see a change in German rhetoric. Angela Merkel knows that she can be a bit more free with her views once the election is out of the way. Although I wouldn't ascribe too much to that - don't expect a sea change in German politics. They still think that the southern European countries should work towards austerity rather than giving them more money." The benefits of the ECB's near-zero interest rates and generous liquidity provision are gradually rippling through the economy. But unemployment is still high in many countries, including Spain, where it's 26 per cent. With productivity likely to rise before employment, policy makers need to ensure labour markets recover - before the long-term jobless lose their skills and become unemployable.

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Is the Euro Zone out of the woods?

Thursday, August 15, 2013 - 02:04