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Greece Threatens Eurozone Economic Growth

Ahead of the July deadline there will be the usual wrangling between Germany and Greece.

Dan Kemp 04 June, 2016 | 13:56
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The recovery goes on, but at a modest pace and with marked disparities across countries. First-quarter growth picked up to 0.6% quarter to quarter, twice the rate of the previous trimester. Industrial production and retail sales improved through March. The advance estimates of PMIs show the pick-up might have continued into April. The euro-coin monthly composite by Banca d’Italia, however, showed negative momentum during Q1, so further improvement in Q2 cannot be taken for granted.

For the year as a whole, fiscal policy might be less restrictive than in 2015, removing a headwind. Despite the formal rules of the Stability and Growth Pact, Brussels has in practice been quite lenient on countries that exceed deficit targets.

Political factors, however, are unfavourable. The terrorist attacks in Brussels, the refugee crisis, and the impact of a possible Brexit might weigh heavily in corporate investment plans, at least through the first half of 2016. Spain, the Eurozone’s fourth economy, faces repeat elections in June, and current polls suggest none of the feasible coalitions will obtain a majority this time either.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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