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Euro zone shaking off the blues?

Thursday, February 26, 2015 - 02:13

Confidence in the euro zone's economy strengthened for the second straight month in February and bank lending fell at a slower pace - small improvements but encouraging all the same. Sonia Legg reports

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Opposition parties in Spain are upping their game ahead of elections later this year. This rally by the anti-austerity Podemos party followed the Prime Minister's state of the nation speech. He said the country was making its way out of a nightmare and was again attractive to investors - they're not convinced. (SOUNDBITE) (Spanish) PODEMOS LEADER, PABLO IGLESIAS, SAYING: "The real nightmare is the reality of our country. Private salaries are 1.5 percent lower than they were in 2011 and public salaries have fallen by 4 percent - 2014 was the year with the highest job destruction since 1996." Unemployment is certainly a huge problem in Spain - one in four are out of work. But there are promising signs. The economy grew by 0.7% between October and December - its fastest rise in seven years. Jane Foley is from Rabobank. (SOUNDBITE) (English) JANE FOLEY, SENIOR CURRENCY STRATEGIST, RABOBANK, SAYING: "We have seen that the impact of reform has been very positive and in terms of Spanish GDP I think it really does uphold the fact that the worst really is behind them. That said if you look at employment rates - in particular youth unemployment rates I think it is quite clear that there is a lot yet to do" There were encouraging signs elsewhere in the euro zone too suggesting the prospect of a 1 trillion euro injection from the ECB is having an impact. Bank lending fell at a slower pace than a month earlier and consumer morale was up in all the key economies - particularly Germany which saw its highest level in 13 years. (SOUNDBITE) (English) JANE FOLEY, SENIOR CURRENCY STRATEGIST, RABOBANK, SAYING: "I think it is safe to say that the data is encouraging but it would be foolhardy to say that there isn't a risk of problems ahead. Deflation is a significant risk for any economy - it is very important to see inflation expectations rise if we are to believe that the monetary policy mechanism can really work in pushing investment out into the economy." Deflation has been a problem in Italy and new retail sales figures for December showed ongoing weakness in consumer demand. They won't welcome the latest poll of investors from ratings agency Fitch. Only 27% think the ECB's QE programme will lift inflation and almost two thirds saw a risk of deflation taking hold - 12% more than in October.

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Euro zone shaking off the blues?

Thursday, February 26, 2015 - 02:13