Rising Euro Slows Europe Economy |
http://www.sina.com.cn 2004/02/17 10:25 Shanghai Daily |
The US$9 trillion economy of the dozen nations sharing the euro unexpectedly slowed in the fourth quarter as the single currency's gains hurt exports and the Italian economy stalled. Gross domestic product, the value of all goods and services, expanded 0.3 percent from the third quarter when it grew 0.4 percent, the European Union's statistics office said. Economists surveyed by Bloomberg News forecast a 0.4 percent gain, the median of 32 forecasts showed. From a year ago, GDP grew 0.6 percent. Europe's recovery from a contraction in the second quarter last year is being held back by the euro's 20 percent gain against the US dollar in the past year. The stronger currency has made European products more expensive abroad and hurt earnings of companies such as Volkswagen AG and Alcatel SA. "Exports are in great difficulty," said Renzo Belcaro, chief executive officer of Silmet SpA in northeast Italy, a producer of metal moldings for cars whose clients include Volkswagen and Fiat SpA. "The dollar is creating huge problems." The euro rose to US$1.2899 last month, the highest since its introduction five years ago, and was trading at US$1.2813 at 11am in Brussels yesterday. Economic growth in the fourth quarter comes at the bottom of the 0.3 percent to 0.7 percent range forecast by the European Commission on January 15. Growth for the first and second quarters this year will also fall within that range, the commission said yesterday. "This prediction suggests that the euro area economy is building on the turnaround that took place in the third quarter of 2003," the commission said. The region's economy shrank 0.1 percent in the second quarter. For the year as a whole, the euro region grew 0.4 percent in 2003, the slowest pace in a decade, Eurostat said. Performance is mixed among the region's three largest economies. Gross domestic product in Italy, the third largest economy using the euro, was unchanged from the third quarter, when it expanded 0.5 percent, the statistics office Istat said yesterday in Rome. Italy is less used to dealing with currency surges than Germany or France. Italy devalued the lira five times against the deutsche mark between 1980 and 1992 to prevent the gains from crimping economic growth. The German economy grew 0.2 percent in the fourth quarter, less than expected, while growth in France reached 0.5 percent, the fastest pace in six quarters, figures on Thursday showed. "We've seen a slow start to recovery in Germany, with the weak dollar taking its pound of flesh," said Dietrich Hoppenstedt, president of Germany's DSGV saving banks group, in an interview. "Yet, I've no doubt that the economy is gathering momentum." DSGV represents 700 savings and state banks with assets of 3 trillion euro (US$3.84 trillion). Faster growth abroad is helping the euro region recover. The US economy may expand this year at the strongest pace since 1984, pushing the unemployment rate lower, US Federal Reserve Chairman Alan Greenspan said on Wednesday. China's industrial production grew last month at a record pace. Investor expectations that the US economy will lift global demand and corporate products has helped European benchmarks gain more than 43 percent since an 11-month rally began in March. The Euro Stoxx 50, a benchmark for the 12 euro countries, has gained 2.2 percent since last Friday. (Bloomberg News) |
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