Renault has suffered a
sharp fall in sales over the last year and has cut production at many
plants. Photograph Christophe Ena/AP
France appears to be heading for a triple dip recession amid concerns that political deadlock in Italy
could drag the eurozone back into crisis. French industrial production
dropped by 1.2% in January despite a strong rebound in German imports
that some analysts believed might rescue some of its neighbours.
Official figures from Paris showed that a longstanding slump in car buying across much of the eurozone has undermined efforts to maintain a 0.9% rise in December. Car-making dropped by 13.5% in January after a revised 8.8% increase in December. Peugeot Citroen and Renault have suffered a steep fall in sales during the last year and cut production at many of their factories.
Analysts said the drop in overall output was a further sign that France's €2tn (£1.7tn) economy could slip into recession after contracting 0.3% in the final quarter of 2012 and following a series of weak data this year.
Italy has proved a particular graveyard for car sellers, prompting the boss of Fiat to say production in Turin may stop if the slide continues for much longer. Fiat, which owns Chrysler, has expanded production in the US while restricting output in the eurozone.
Rome was battling to maintain some stability after figures showed its recession is likely to run into 2014 even with a resolution to the electoral stalemate. One analyst said Italy posed a "near and present danger" for the eurozone.
Gary Jenkins, of Swordfish Research, said the most likely outcome from Italy's inconclusive election would be a technocratic government that pledged to maintain reforms, but a coalition could refuse to abide by tough rules set by the European Central Bank, prompting a clash in Brussels. Mario Draghi, president of the ECB, said last week that Italy "should continue first on the structural reform path, which is the only way that can restore growth". He added that it was a priority to maintain credibility with the markets.
Jenkins said Draghi "didn't sound to me like a man who thought that it was appropriate for Europe to move away from austerity". He added: "Thus it could bring him into conflict with politicians before very long if the economy does not recover and job creation remains non-existent in the stressed countries of Europe. While Mr Draghi has stated he will do 'whatever it takes,' that does not necessarily mean that he will immediately cave in to the demands of politicians."
If Italy ends up with an anti-austerity government, the market may assume that the ECB's promise of support via its bond-buying programme – the so-called OMT – could be weakening. Such a move could cause Italy's borrowing costs to escalate.
Beppe Grillo, leader of the Five Star Movement – which controls the lower house and has the largest bloc in the upper house – has continued to mock his social democrat rival Pier Luigi Bersani, dampening hopes that a coalition can be found. Many analysts believe another election is likely in a few months.
The pressure on Brussels to loosen its purse strings and relax some austerity measures intensified after a speech in London by the Irish prime minister, Enda Kenny. He told a City audience that he wanted Britain to stay in the EU to join calls for a strong internal market. He also used the speech to plead for better terms to Brussels €65bn rescue deal.
"While Ireland's future is closely tied to the EU, it is also closely connected to our nearest neighbours – here in Britain," he said.
"Having the ability to work together within the European Union on the many issues on which we are of like mind – the single market, trade and so on – amplifies the impact of our excellent relationship generally.
"We see the British relationship with the EU as being a two way relationship – Britain benefits from its membership of the EU, and the EU is better off with Britain as a leading member making a valued contribution."
Official figures from Paris showed that a longstanding slump in car buying across much of the eurozone has undermined efforts to maintain a 0.9% rise in December. Car-making dropped by 13.5% in January after a revised 8.8% increase in December. Peugeot Citroen and Renault have suffered a steep fall in sales during the last year and cut production at many of their factories.
Analysts said the drop in overall output was a further sign that France's €2tn (£1.7tn) economy could slip into recession after contracting 0.3% in the final quarter of 2012 and following a series of weak data this year.
Italy has proved a particular graveyard for car sellers, prompting the boss of Fiat to say production in Turin may stop if the slide continues for much longer. Fiat, which owns Chrysler, has expanded production in the US while restricting output in the eurozone.
Rome was battling to maintain some stability after figures showed its recession is likely to run into 2014 even with a resolution to the electoral stalemate. One analyst said Italy posed a "near and present danger" for the eurozone.
Gary Jenkins, of Swordfish Research, said the most likely outcome from Italy's inconclusive election would be a technocratic government that pledged to maintain reforms, but a coalition could refuse to abide by tough rules set by the European Central Bank, prompting a clash in Brussels. Mario Draghi, president of the ECB, said last week that Italy "should continue first on the structural reform path, which is the only way that can restore growth". He added that it was a priority to maintain credibility with the markets.
Jenkins said Draghi "didn't sound to me like a man who thought that it was appropriate for Europe to move away from austerity". He added: "Thus it could bring him into conflict with politicians before very long if the economy does not recover and job creation remains non-existent in the stressed countries of Europe. While Mr Draghi has stated he will do 'whatever it takes,' that does not necessarily mean that he will immediately cave in to the demands of politicians."
If Italy ends up with an anti-austerity government, the market may assume that the ECB's promise of support via its bond-buying programme – the so-called OMT – could be weakening. Such a move could cause Italy's borrowing costs to escalate.
Beppe Grillo, leader of the Five Star Movement – which controls the lower house and has the largest bloc in the upper house – has continued to mock his social democrat rival Pier Luigi Bersani, dampening hopes that a coalition can be found. Many analysts believe another election is likely in a few months.
The pressure on Brussels to loosen its purse strings and relax some austerity measures intensified after a speech in London by the Irish prime minister, Enda Kenny. He told a City audience that he wanted Britain to stay in the EU to join calls for a strong internal market. He also used the speech to plead for better terms to Brussels €65bn rescue deal.
"While Ireland's future is closely tied to the EU, it is also closely connected to our nearest neighbours – here in Britain," he said.
"Having the ability to work together within the European Union on the many issues on which we are of like mind – the single market, trade and so on – amplifies the impact of our excellent relationship generally.
"We see the British relationship with the EU as being a two way relationship – Britain benefits from its membership of the EU, and the EU is better off with Britain as a leading member making a valued contribution."
No comments:
Post a Comment