European GDP data were released this morning, missing expectations and offering scant evidence of improvement for the troubled region. GDP for the 17-nation Eurozone dropped 0.2%, worse than the 0.1% expected contraction. The recession has now extended into a sixth consecutive quarter. As for the two stalwart nations on the continent, Germany saw 0.1% growth and France officially fell into a recession with a contraction of 0.2%. European markets had little reaction to the news.
The optimists at the IMF point to the improvement last year. Germany, worried about picking up the tab for potential stimulus, seems to think things are going just fine as long as deficits are under control. According to Marc Chandler, head of global currency strategy at Brown Brothers Harriman, Germany's push for austerity is still carrying the day in Europe.
History suggests Europe is reluctant to be dictated to by the Germans. If they object this time around they shouldn't look to the U.S. for help. As Chandler sees it America and the IMF are just fine with the current path. "For the first time in American history its alright for a hedgom to come in power in Europe," he says in the attached video.So Germany is forcing austerity on the rest of Europe without protest despite unemployment rates still ticking higher on most of the continent. The Eurozone unemployment rate for March exceeded 12.5%. Southern Europe is getting hit the hardest. The jobless rate is above 27% in both Spain and Greece. Portugal unemployment came in at 17.5% in March, even as the nation is trying to meet the latest round of spending cuts.
But never mind all that. The IMF insists Spain will have a budget surplus by 2018 and such improvement will be organic, not drawn from other member nations. With deficits falling Germany wants to stay the course, despite record and rising unemployment.
If that seems wrong chalk it up to American impatience. The improvements may seem either glacial or non-existent to the rest of the world, but the Germans and IMF regard them as good enough.
"Things are moving in the way that Germany wants, at a slow pace," says Chandler.