Italian third-quarter GDP revised from contraction to stagnation. The
Italian economy did not contract in the third quarter of the year, it was merely
flat, according to today's revision of the initial estimate. The GDP figure has
been revised from 0.1pc growth to 0.0pc. This may not sound great, but it is
the first quarter that the economy has not contracted since the second quarter
of 2011. Italy is also outgrowing France for the first time in over two
years - France shrunk at 0.1pc in the third quarter...
Meanwhile, Christine Lagarde,
the managing director of the International Monetary Fund, has warned that
long-term prospects for growth in the eurozone look bleak unless politicians act
urgently to stoke domestic demand and tackle youth unemployment. After months
of relative calm in financial markets, and with Ireland due to end its painful
bailout programme and end its reliance on the IMF this weekend, some European
politicians have declared the worst to be over for the 17-member single currency
zone. But speaking at the European Economic and
Social Committee in Brussels, Lagarde warned against prematurely declaring
an end to the economic crisis. "Can a crisis really be over when 12% of the
labor force is without a job? When unemployment among the youth is in very high
double digits, reaching more than 50% in Greece and Spain? And when there is no
sign that it is becoming easier for people to pay down their debts?" She warned
that high youth unemployment could jeopardize the economy's ability to grow in
the future, by creating a generation of young people without the skills to take
their place in the jobs market. "What is at stake is Europe's potential for
growth in the future," she said. "Unemployment at a young age means a lack of
on-the-job training, depreciating skills, and possible withdrawal from the
labor market. Experience tells us that long spells of unemployment lead to a
less productive workforce down the road." Lagarde called for a raft of reforms,
including fixing the battered banking sector, to "jump-start growth", and warned
that with monetary policy all but exhausted, and interest rates already close to
zero, governments might yet need to resort to a new fiscal stimulus if recovery
fails to take hold. "In the event growth is low for a protracted period of time
and monetary policy options are depleted, fiscal policy will need to provide
more support to domestic demand," she said. In a veiled criticism of Germany,
which has tended to rely on an export-led growth model, Lagarde suggested that
boosting Europe's growth potential will require stoking demand at home, too.
"Most of the demand for European goods and services comes from abroad, not from
within, leaving the economy at the mercy of the ups and downs of global trade.
European demand for European products remains lackluster." After The ECB President Mario Draghi unexpectedly announced a cut in interest
rates last month to stave off deflation, Lagarde called for the ECB to "keep
interest rates low and convince investors that it will do so for as long as is
necessary." The IMF would also like to see a series of labor market reforms,
including making it easier for skilled employees to cross Europe's borders in
search of work; cutting employment regulation; and shifting the burden of
taxation from income on to consumption, in the hope of boosting future job
prospects. "There can be no letting up on reforms until growth has recovered
sufficiently to arrest the rise in unemployment and debt", Lagarde said.
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