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.
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