Germany is again a focus of concern over the euro zone economy as export and output data decline unexpectedly. And, as David Pollard reports, there are more questions over how effective a much hoped-for ECB programme of bond-buying or QE, might actually be.
It was what stock markets call an UP day on Thursday. European shares rising sharply on signs the Fed may not be in such a hurry to raise rates. The mood as the week closed looked firmly down. At least, in first reaction to Germany's latest numbers. November exports slipped unexpectedly - and industrial output declined more than forecast. For a euro zone already punchdrunk on negative news, it was another blow. Though Commerzbank's global financial economist, Peter Dixon says that for its leading economy, Germany, perhaps it shouldn't be. SOUNDBITE (English) PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING: ''We have a very mixed picture. I think what we saw in the course of 2014 was an economy which lost an awful lot of momentum. Things like the purchasing managers indices have stabilised, and to that extent we can expect the German economy to continue growing in 2015.'' For Italy though, a different take on news of a widening budget deficit in the first nine months of last year - and even further off the euro zone's three percent target limit. SOUNDBITE (English) PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING: ''It seems to show no signs of economic reform, and as a consequence remains stuck very much in low gear, with the result that Italy continues to act very much as a drag on the core - if you can put Italy in the core - of the euro zone.'' As if it weren't already heated enough, it all stokes the debate over QE. The ECB's long-awaited programme of sovereign bond buying will be announced on January 22nd. Or such is the conviction that's going to happen that many in the markets are overlooking this issue: will it work? And now there's talk the ECB may consider other 'QE-lite' options instead of full-blown sovereign bond-buying. Adding more question marks. SOUNDBITE (English) PETER DIXON, GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, SAYING: ''It's questionable whether QE will have much of an impact on the economy or indeed inflation, anyway. That certainly has been the experience in other economies where it has been tried. But certainly I do think that if the QE programme is watered down in any way - in other words, it's not the full-blown QE that we've seen from the likes of the Fed - then the markets are going to take that fairly negatively.'' What good news there was later in the day came from the US. Payroll numbers showing growth there increasing briskly. Though some reacted to that news by predicting it could make a Fed hike more likely after all.