Germany is not immune to the contraction in the eurozone, as the European Central Bank's Mario Draghi defends bond-buying and Greece claims an austerity victory.
The depth of the eurozone recession was confirmed by closely-watched surveys which showed the region’s economy contracted at its fastest rate in 40 months, with the malaise spreading to Germany, its economic powerhouse.
The gloomy monthly data came as the European Central Bank defended efforts to stem the region’s debt crisis, while officials denied Greek politicians’ claims it has won more time to enact austerity efforts demanded under its bail-outs.
The currency union’s economy is shrinking rapidly, according to Markit’s purchasing managers’ index (PMI) for the region, which tracks growth in services and manufacturing.
The index dropped from 46.1 in September to 45.8 this month, its lowest since June 2009.
Researchers said this was consistent with the region’s economy shrinking by 0.6pc per quarter, a far steeper decline than indicated by official data.
The survey has been below the 50 mark that separates growth from contraction since February. The individual PMI for Germany showed that the eurozone’s biggest economy, is not proving immune to the slowdown.
The index tracking Germany’s manufacturing and services signalled another drop in the country’s overall private sector activity, with factories reporting “a sharp and accelerated decrease” in their flow of new orders.
Meanwhile, German business confidence dropped for a sixth consecutive month to its lowest level since February 2010, according to the Ifo survey.
Chris Beauchamp, an analyst at IG, said: “Markets can live with poor figures from most of the eurozone, but disappointment from the union’s strongest pillar is perhaps more than investors can bear.”
The disappointing data was followed by Mario Draghi, president of the European Central Bank, defending the central bank’s efforts to tackle the debt crisis which is acting as a brake on growth.
Mr Draghi told politicians in Berlin that his plans to buy up the bonds, or debt, of struggling euro nations will not fuel inflation as many Germans fear, as a price fall is the “greater risk”.
“In this sense, [bond purchases] are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it,” he said. “Unfounded fears about the future of the euro area had to be removed.
The only way to do so was to establish a fully credible backstop.” Bond-buying will only be triggered once countries apply for help from European rescue funds, which will mean the aid comes with conditions, he stressed.
The response from German politicians appeared broadly positive. Norbert Barthle from the Christian Democrats party, said that Mr Draghi “struck us as a Prussian southern European”.
However, while the ECB president poured cold water on reports from Greece that it has been granted a delay to enact austerity reforms demanded by its international rescuers, politicians in Athens were celebrating a victory.
Yannis Stournaras, the finance minister, said Greece has been granted more time to meet the terms of its bail-out programme under which it receives emergency payments.
“We have obtained the extension,” he told parliament.
In response, Mr Draghi said that the review of Greece by its so-called “troika” of lenders - the EU, the European Central Bank and the International Monetary Fund (IMF) - was “not finished yet”.
Separately, the IMF tonight released its latest €1.5bn (£1.2bn) loan tranche to Portugal, following a review of its bail-out programme.
telegraph.co.uk
The depth of the eurozone recession was confirmed by closely-watched surveys which showed the region’s economy contracted at its fastest rate in 40 months, with the malaise spreading to Germany, its economic powerhouse.
The gloomy monthly data came as the European Central Bank defended efforts to stem the region’s debt crisis, while officials denied Greek politicians’ claims it has won more time to enact austerity efforts demanded under its bail-outs.
The currency union’s economy is shrinking rapidly, according to Markit’s purchasing managers’ index (PMI) for the region, which tracks growth in services and manufacturing.
The index dropped from 46.1 in September to 45.8 this month, its lowest since June 2009.
Researchers said this was consistent with the region’s economy shrinking by 0.6pc per quarter, a far steeper decline than indicated by official data.
The survey has been below the 50 mark that separates growth from contraction since February. The individual PMI for Germany showed that the eurozone’s biggest economy, is not proving immune to the slowdown.
The index tracking Germany’s manufacturing and services signalled another drop in the country’s overall private sector activity, with factories reporting “a sharp and accelerated decrease” in their flow of new orders.
Meanwhile, German business confidence dropped for a sixth consecutive month to its lowest level since February 2010, according to the Ifo survey.
Chris Beauchamp, an analyst at IG, said: “Markets can live with poor figures from most of the eurozone, but disappointment from the union’s strongest pillar is perhaps more than investors can bear.”
The disappointing data was followed by Mario Draghi, president of the European Central Bank, defending the central bank’s efforts to tackle the debt crisis which is acting as a brake on growth.
Mr Draghi told politicians in Berlin that his plans to buy up the bonds, or debt, of struggling euro nations will not fuel inflation as many Germans fear, as a price fall is the “greater risk”.
“In this sense, [bond purchases] are not in contradiction to our mandate: in fact, they are essential for ensuring we can continue to achieve it,” he said. “Unfounded fears about the future of the euro area had to be removed.
The only way to do so was to establish a fully credible backstop.” Bond-buying will only be triggered once countries apply for help from European rescue funds, which will mean the aid comes with conditions, he stressed.
The response from German politicians appeared broadly positive. Norbert Barthle from the Christian Democrats party, said that Mr Draghi “struck us as a Prussian southern European”.
However, while the ECB president poured cold water on reports from Greece that it has been granted a delay to enact austerity reforms demanded by its international rescuers, politicians in Athens were celebrating a victory.
Yannis Stournaras, the finance minister, said Greece has been granted more time to meet the terms of its bail-out programme under which it receives emergency payments.
“We have obtained the extension,” he told parliament.
In response, Mr Draghi said that the review of Greece by its so-called “troika” of lenders - the EU, the European Central Bank and the International Monetary Fund (IMF) - was “not finished yet”.
Separately, the IMF tonight released its latest €1.5bn (£1.2bn) loan tranche to Portugal, following a review of its bail-out programme.
telegraph.co.uk
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