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France, Italy lag in euro zone recovery

Tuesday, May 06, 2014 - 02:00

May 6 - Euro zone businesses have made a solid start to the second quarter of the year with activity picking up at its fastest pace in almost three years. Joanna Partridge looks at how broad-based the recovery is.

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European business back with a bang. Euro zone companies had a solid start to the second quarter of the year - with business activity growing at the quickest rate in almost three years, boosted by new orders. Surveys showed a broad-based recovery taking hold. Germany continued to lead the upturn, but firms in Spain and Ireland grew at their fastest pace since before the financial crisis. Overall, the data will come as a relief to the European Central Bank. So far it's shrugged off calls for more stimulus via another interest rate cut or quantitative easing and is widely expected to keep key rates on hold again later this week despite worries about deflation. Joe Rundle is from ETX Capital. SOUNDBITE: Joe Rundle, Head of Trading, ETX Capital, saying (English): "Draghi is the master of saying a lot and not doing anything which is what he hopes, which seems to be his plan, so I imagine he is going to talk about QE and the possibility of it, but not actually pull the trigger. I think the markets will force him into QE, probably later on this summer." The OECD has forecast a slightly better outlook for the euro zone. But there are still some countries causing concern. And that's leading to fears of a two-speed bloc, says Peter Dixon from Commerzbank. SOUNDBITE: Peter Dixon, Global Economist, Commerzbank, saying (English): "France and Italy appear to be struggling and that's an indication of the fragility which still lies at the heart of the euro zone recovery, and if we were to get some kind of a shock, then I'm sure that would have a major adverse impact upon the euro zone picture. Clearly, you know, they're just trundling along, I think there's no real sense of urgency there to put in place the reforms that many of the other countries have already done." France also received another warning - from the EU. It said Paris would miss its 2015 budget deficit target unless it makes rapid changes to policy. President Hollande, already suffering from record low popularity ratings, was grilled for an hour by angry listeners to a French radio station. He didn't comment on France's budget deficit, but promised voters he would speed up reforms to put the country back on track.

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France, Italy lag in euro zone recovery

Tuesday, May 06, 2014 - 02:00