Optimism in eurozone improves

Optimism in the eurozone’s economy improved sharply in August but high unemployment highlighted the fissure separating the recovering north from the struggling south.

Confidence among business managers polled by the European Commission rose for a fourth successive month in the eurozone, the EU executive said yesterday. The positive trend was particularly strong in Germany and the Netherlands but was also seen in Italy, France, and Spain.

The measure of sentiment across the currency bloc in August, based on business orders, industrial confidence, and other factors such as companies’ hiring plans, increased by 2.7 points to 95.2.

Rising confidence has inspired some to predict that the 17 countries using the euro have overcome the worst of a crisis that was triggered by banks’ investment in risky mortgage debt and later drove some states to the brink of bankruptcy.

“The most acute phase of the crisis and the toughest period of belt-tightening is behind us,” said Dirk Schumacher, an economist with Goldman Sachs.

Eurostat, the EU’s statistics agency, said annual consumer price inflation in August would be 1.3%, down from 1.6% in the previous month, due mainly to a drop in energy prices.

A lack of price pressures is a further potential boon to the economy, giving households a little more spending power, and would allow the ECB to stick to its record lower interest rate policy.

German Bundesbank chief Jens Weidmann said on Thursday that the longer interest rates stay low, the less effective monetary policy becomes and the more difficult it will be to withdraw support measures.

Unemployment in the eurozone remained at a record high in July of 12.1%, While just over 5% of workers in Germany were unemployed, that figure reached almost 28% in Greece and topped 26% in Spain. Although there were 15,000 fewer people in the eurozone without a job compared with the previous month, 3.5m people under 25 remain unemployed.

— Reuters