Is the eurozone on path to recovery?
TEXT OF INTERVIEW
Stacey Vanek-Smith: Some good news out of Europe this morning. The eurozone is officially out of recession. Germany, France and Italy all reported growth in their gross domestic products. The three countries make up about two-thirds of Europe’s economy. The GDP is a measure of all the goods and services a country produces and it’s generally considered to be the indicator of economic growth.
We got some good GDP news here in the U.S. last month. So are we all on the road to recovery? Thought we’d run that by economist Andrew Hilton in London. Andrew, thanks for joining us.
Andrew Hilton: My pleasure.
Vanek-Smith: So a positive GDP growth in Germany, France and Italy. Is the recession officially over?
Hilton: Well the recession is officially over, but I don’t think one should get too excited about it.
Vanek-Smith: What is fueling the gains that we’re seeing now? It sounds like you think they’re a little bit fragile, but what’s fueling them at the moment?
Hilton: Well in Europe I think one of these things that is working is the export factor. French exports are strong, German exports are strong. But unfortunately this is threatened by the strength of the euro, particularly the strength of the euro against the dollar.
Vanek-Smith: One thing that they were saying about the GDP growth in this country was that a lot of it was artificial, that a lot of it was sort of dependent on the money that the government had pumped into the economy. Is that true in Europe as well?
Hilton: It is indeed. In the U.K., we have a quantitative-easing program that is just as intense as anything you’re doing in the U.S. In Europe, in continental Europe, in the eurozone, the European Central Bank is also pumping unprecedented amounts of money into the economy. Some of it sticks, much of it is wasted. I’m a skeptic about quantitative easing and a skeptic about aggressive monetary easing, but inevitably some of this money will stick. However, the easing at some stage is going to have to be reversed, and that’s going to be a problem for economies around the world.
Vanek-Smith: Apparently the GDP numbers are not impressing you this morning. What will it take for you to think that the recession is indeed ending?
Hilton: A very bright light in the east and the word of god telling me.
Vanek-Smith: Well short of divine intervention?
Hilton: Well I think not much. I mean, I will remain skeptical at least through the end of 2010, unless there is clear evidence that the banks are starting to do, again, what banks are supposed to do, which is lend. I think we have a real problem still in the prime-mortgage are, not just the subprime-mortgage area. We have a continuing problem with consumer debt. And the banks are not lending to the smaller industries, really that are the backburn of the economy on both sides of the Atlantic. And where 60 percent of the jobs are created. Until we can start to create those jobs, I don’t see that the recession is over.
Vanek-Smith: Economist Andrew Hilton, thank you so much.
Hilton: My pleasure.
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