England, France facing more financial struggles
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Jeff Horwich: Today’s take out out of Europe is dire on numerous fronts. The Bank of England forecasts this morning the U.K. economy will not grow at all in the coming quarter. Across the channel, the French central bank says the euro’s second-largest economy is headed for its own recession. And Germany’s being infected by all this through its exports, which fell in June.
Christopher Werth is reporting for us from London, on the latest releases. Good morning.
Christopher Werth: Good morning.
Horwich: So what are the details of this outlook from the Bank of England?
Werth: Not good. I was just watching the governor of the Bank of England, Mervyn King, in a press conference this morning. I have to say, the tone looked pretty grim in there. The bank has cut its growth forecast from about 0.8 percent back in May to just about nothing right now.
Britain is already in a double dip recession — which shows it is not immune to the eurozone crisis even though it’s not in the eurozone. And that’s going to put a lot of pressure on the British government’s budget-cutting measures that it’s been putting in place over the past couple of years.
Horwich: And right about the same time, France’s central bank says a recession is on the way now for them — two quarters of shrinking GDP. What are the biggest challenges there?
Werth: French companies have lost competiveness. We see French automakers like Peugeot struggling to compete against the likes of Volkswagen, for example. But France has a big spending problem. And it’s pledged to reduce its budget deficit from around 6 percent now to 3 percent next year — that’s a huge leap.
I spoke with Carsten Brzeski at ING bank in Brussels today. He said if France can’t manage to pull that off, it may have to line up in that row of dominos we’ve seen falling across the eurozone.
Carsten Brzeski: If you look at the economic situation in France it is worrying. And if they don’t succeed next year I think we could really have a big problem in the eurozone.
Horwich: Well gosh, I hate to say it Christopher, but let’s get down to what’s really important here: Will any of this cause European leaders to cut short their vacations?
Werth: You know, Jeff, nothing cuts short the tradition of taking the month of August off.
Horwich: Well I wish them sunny skies at least while they’re on the beach. Christopher Werth for us in London, thank you.
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