Will German, French bounceback last?

Marketplace Staff Aug 13, 2009
HTML EMBED:
COPY

Will German, French bounceback last?

Marketplace Staff Aug 13, 2009
HTML EMBED:
COPY

TEXT OF INTERVIEW

Bill Radke: One day after the Federal Reserve declared America’s recession near an end, the recession in France and Germany has officially ended — at least for now. This morning, those countries reported slight growth in their gross domestic products — three tenths of 1 percent. On the line with us is Andrew Hilton, director of the Center for the Study of Financial Innovation in London. Good morning.

Andrew Hilton: Good morning.

Radke: Most economists were surprised by this. They were expecting another quarter of contraction, what happened?

Hilton: Well I was one of the economists who was surprised. I thought we weren’t by any means past the bottom of the recession yet, but it does seem as though there has been a bounce. It’s almost certainly an inventory-led bounce. People have been cutting inventories to unrealistically low levels. So at some stage, some sort of recovery is inevitable. It’s almost arithmetic rather than economic.

Radke: Well this is one quarter of growth, what does it say about next quarter or next year?

Hilton: I don’t think it says much about either of those. I think that there are still serious problems in the eurozone in general. And indeed it’s worth noting that the eurozone — which is the area that shares the common currency — actually saw its GDP as a whole fall. Germany and France were up, but Italy and Holland in particular were down quite sharply.

Radke: Well I was going to ask a question that I imagine French and German politicians are asking about who gets the credit for this growth. Given your pessimism, I wonder whether there’s that much credit to go around?

Hilton: Well I think the politicians will certainly take it. There are elections coming up in Germany within the next few weeks. And undoubtedly Merkel will see this as a major plus for her. She was going to win anyway. I think she’ll win a bit bigger as a result.

Radke: And what does this mean for our listeners here in the states, do you think?

Hilton: Probably not very much. But there will be an issue as economists focus on why the European economy’s bounced and whether this was just an inventory-led bounce or whether it’s something real and will last over time.

Radke: Andrew Hilton, director of the Center for the Study of Financial Innovation in London. Thank you.

Hilton: My pleasure.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.