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Friday, August 14, 2009

Germany and France Return to Growth

Germany and France have surprised the markets and have returned to growth in Q2 this year, whilst the UK remains stuck in recession.

How has this come about?

1 The UK economy is far more closely tied to the fate of the financial markets than France and Germany.

2 France and Germany have spent far more money propping up their domestic economies via "cash for clunker" payments and job support schemes.

However, before the champagne corks are popped in Berlin and Paris, a word of caution. The government support schemes are coming to a close, both Germany and France will need to increase their exports if the upturn is to be maintained.

One positive quarter does not necessarily make a trend.

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