The European crisis is taking its toll on even the strongest Eurozone countries, Germany and France. Although the two countries are stalwarts in the region, their growth has slowed and the severity of the sovereign debt crisis is eroding their strength.
So much so that it has caused the entire region’s economy to dip .7% into negative territory after holding its own for the first three quarters of the year.
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There is less money to pay for imports from China, US, and other external economies. Growth in Germany slowed to 1.1%, certainly not a strong enough growth rate to lift the sinking boats in the Eurozone.
The dire situations of Spain, Italy, and others have created a continual drag on Europe as a whole and the International Monetary Fund (IMF), the US government, and multiple economists are urging Europe to boost spending in countries like Germany that are still strong but weakening.
The continued demand for austerity without growth is bringing down the entire region instead of inspiring confidence. The wide-spread demand for austerity across the Eurozone is becoming counter-productive.
It increases borrowing costs to the point where it’s practically impossible for severely weakened economies like Spain and Italy to have access to the capital they need.
Unfortunately, as long as Germany’s economy is outperforming other Eurozone countries, it is unlikely to change its stance on fiscal policy or to support the European Central Bank’s (ECB) promise to provide capital where needed.
France’s economy continues to stagnate but the two most critical situations
are in Spain and Italy who are both on the brink of needing aid from the ECB. Just what will prove to be the breaking point that instigates a willingness to boost growth and exactly when that breaking point will occur is anyone’s guess.