French household spending dropped 2.7pc in January, led by a 19pc collapse in car sales following the end of France’s scrappage scheme. Germany’s IFO business confidence index dropped for the first time since the depths of the crisis in December 2008, partly due to bad weather. Confidence relapsed in Italy.
Mervyn King, the Bank of England’s Governor, said Europe’s rebound “appears to have stalled” , posing fresh risks for Britain as well. “My particular concerns at present derive from the state of the world economy and our largest trading partner, the euro area,” he said.
Mr King said surplus countries around the world are not stimulating enough to offset belt-tightening by deficit states such as the UK, US and Spain, citing the eurozone as a “microcosm” of the problem. “I was struck by the mood at the G7 meeting in Canada, where several of the major economies around the world said quite openly that they were relying on external demand growth to generate growth in their economy. That can’t be true of everybody,” he said.
The eurozone grew by just 0.1pc in the last quarter of 2009 as government stimulus wound down. Germany was flat; Italy contracted again; Spain and Greece were still in recession. Outside EMU, the Czech, Hungarian and Romanian economies all shrank.
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