Tags: EU | Europe | Interest | Rates

Trichet: European Indicators 'Better Than Expected'

Thursday, 05 Aug 2010 09:15 AM

Economic growth in the eurozone is on course to be better than anticipated in both the second and third quarters of the year, the European Central Bank's president said Thursday — underlining the new-found optimism about the 16-nation bloc's prospects.

Jean-Claude Trichet's comments came after the bank, as expected, left interest rates unchanged at a record-low 1 percent for the 15th consecutive month.

"The available economic data and survey-based indicators suggest a strengthening in the economic activity in the second quarter of 2010 and the available data for the third quarter are better than expected," Trichet told a news conference.

Despite his more upbeat tone, Trichet said the bank was "not declaring victory" — it continues to expect economic growth to be "moderate" and "uneven" in an ongoing "environment on uncertainty."

Trichet said the second half of the year was likely to show growth easing from the "flattering" reading expected for the second quarter — figures are due next week.

Trichet's comments come at the end of a period when the market concern has been on the U.S. economy losing steam, instead of the government debt crisis which engulfed the eurozone for much of the year.

However, Trichet said "it would be very premature" to draw negative conclusions about the U.S. economy at the moment.

The eurozone's marked improvement has been most evident in the industrial sector as exporters, particularly in Germany, reap the benefits of a pickup in global trade.

Since the ECB last considered its rates, Europe has published the results of stress tests on 91 banks across the continent. Only seven failed, and many observers deemed the exercise too easy, but — in a reflection of the brighter European outlook — fears of renewed market turbulence proved unfounded.

Successful bond auctions by financially shaky Greece, Portugal and Spain also have helped calm markets. The ECB has been able to scale back several crisis measures and its emergency program to prop up bond markets by buying the debt of troubled governments has nearly ground to a halt.

"I am quite happy that this program — which continues — is meager," Trichet said, adding that he would offer "no further indication" on how it will proceed in future.

Earlier Thursday, the IMF, EU and ECB said Greece has made good progress implementing an austerity program to tackle its debt crisis and is expected to receive the second installment of rescue loans next month.

Separately, German government data showed industrial orders returning to strong growth in June.

Still, the outlook isn't all sunshine. Economists expect the pace of economic growth to ease in the second half and consumers appear reluctant to spend.

Official figures released Wednesday showed that retail sales in the eurozone were flat on the month in June.

With inflation still tame, the ECB may want to keep rates on hold well into next year.

Also Thursday, the Bank of England left its interest rate unchanged at 0.5 percent for the 18th month.

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Economic growth in the eurozone is on course to be better than anticipated in both the second and third quarters of the year, the European Central Bank's president said Thursday underlining the new-found optimism about the 16-nation bloc's prospects. Jean-Claude...
EU,Europe,Interest,Rates
488
2010-15-05
Thursday, 05 Aug 2010 09:15 AM
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