There has been a lot focus over the years on economic conditions in southern Europe and in particular Italy, which is potentially headed into a painful debt crisis. We share these concerns, but Europe’s problems reach beyond the peripheral countries. German quarterly GDP growth has lagged the region for the past two quarters, and the best one could say is that activity in this key economic engine is getting less worse. The German Federal Statistics Office reports flat growth for the fourth quarter versus a decline in Q3, thus narrowly avoiding a recession. Germany is the world’s third-largest exporter and it is undoubtedly facing headwinds associated with slowing global economic growth, notably in China, and uncertainty related to the US – China trade negotiations as well as the outcome of Brexit. Germany is the largest economy in the Eurozone and this growth stall may prompt Brussels to adopt a more pro-growth policy stance. That would be welcomed news, particularly to the Italians. Stay tuned.
