00:00 Well, let's talk to Vicky Price, the international economist and business consultant.
00:05 Vicky, what do you make of these figures?
00:09 It's not greatly surprising, but what is surprising is that there are big differences within that overall figure.
00:14 So we're talking about the European economy basically sort of flatlining at the end of 2023.
00:21 But within that, yes, Germany falling GDP in the last quarter. Yes, France, really no change in GDP then.
00:28 But then you have some of the southern European countries doing considerably better, which include, of course, Spain and Italy and Portugal.
00:35 And it's interesting because Spain saw an increase of point six percent in terms of growth in GDP in the last quarter.
00:41 And the previous quarter, it has seen growth of point four percent.
00:44 So there are different trends happening in different parts of the EU.
00:48 And it's not hugely surprising that Germany, which has been particularly badly affected by the developments in the gas supply side
00:55 and exports, of course, to China, which have suffered, is doing worse than others.
01:00 Whereas those that are not that dependent on on China and exports more generally or on very energy intensive industries,
01:08 which they then rely on for exports and growth, those countries have done better.
01:14 Well, let's just look at that. Good news. There isn't much of it to be had.
01:18 But Spain, Italy and Portugal, as you say, going like the clappers compared to everybody else, relatively speaking.
01:25 Why are they doing so much better? It's really interesting because after all,
01:30 what you've seen is a decline in inflation happening across the EU and wages only recovering a little bit.
01:35 But in those countries, it seems that confidence has come back, particularly for the household sector.
01:41 Remember, those countries also have had the benefit of a very substantial increase in tourism,
01:46 which took place over the last summer, of course, post-COVID.
01:50 In fact, in some countries, the numbers of tourists coming is even greater than was the case before.
01:54 And they have really benefited from that increase in demand that has taken place.
01:58 That has given confidence in terms of the construction sector in particular.
02:01 We've seen Southern Europe actually finding itself once again in a sort of quite a positive situation about house building,
02:09 which is really good news for them since construction is such a large part of the economy, the property market.
02:14 So they have benefited from that. So the question is how fast that can also spread across the rest of Europe,
02:20 because wages are beginning to pick up across many countries.
02:24 And there are some areas where you do have a bit of a real increase in wages,
02:28 but it's been a lot slower getting there than, for example, in the US and, for example, also here in the UK.
02:34 I mean, let's be fair. Recession in the eurozone was narrowly avoided.
02:38 I mean, that was a huge relief, wasn't it, given the persistent high inflation, the likes of which we haven't seen for decades?
02:47 Well, it's not so much the inflation, which has been coming down very, very fast anyway, frankly.
02:51 So if you see some countries over the last few months have seen deflation.
02:55 So, for example, the Netherlands saw that for a bit. We've seen that also happening in Belgium.
02:59 You've seen also in Spain, where you're seeing a bit of an increase now in inflation, also having inflation below 2 percent.
03:05 What is the real problem and has been the real problem in Europe is the high interest rates,
03:09 which for this type of inflation environment are perhaps no longer justified.
03:14 So they need to come down. And I think the European Central Bank acknowledges that.
03:18 More or less, it's going to look, it said, at what happens in growth in the first quarter and then rethink its policy.
03:24 So the expectation now is that perhaps we're going to see a slightly faster reduction interest rates than would otherwise be the case.
03:30 Vicky, great to see you. Thanks so much for coming on the program again.
03:32 Vicky Price, the international economist and business consultant.
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