Howard Wheeldon Comments: Faltering Steps - Sophia Echo

Friggatriskaidekaphobia* aside, Friday August 13 2010 confirmed good news from the economy of the European Union, which reported second-quarter growth of one per cent, buoyed mainly by a strong performance by Germany.

For Bulgaria, however, the big question remains whether economic growth in the 27-member bloc will prove strong and sustainable enough to float the economy of the EU's least wealthy member off the sandbar where it has remained grounded by the crisis.

According to figures announced on August 13 by the EU's statistics office, Eurostat, the 16-member euro zone's economy grew by one per cent in the second quarter of 2010, a significant improvement from the Q1 figure of 0.2 per cent.

According to Eurostat, compared with the second quarter of 2009, seasonally adjusted GDP increased by 1.7 per cent in both the euro area and the EU27 in the second quarter of 2010, after increases of 0.6 per cent and 0.5 per cent, respectively, in the previous quarter.

During the second quarter of 2010, US GDP increased by 0.6 per cent compared with the previous quarter, after increasing by 0.9 per cent in the first quarter of 2010. US GDP rose by 3.2 per cent compared with the same quarter of the previous year (+2.4 per cent in the previous quarter).

In Germany, growth was 2.2 per cent, higher than at any time since the fall of the Berlin Wall.

Howard Wheeldon, Senior Strategist at BGC Partners in London, said in an interview with the Voice of America that Germany has led the way for European growth.

"Germany is the powerhouse, the engine of the EU, it's the engine of the euro zone," he said. "Ultimately though, I do foresee that if the German strength continues at this pace it is going to cause additional problems for the euro zone."

Wheeldon said that it would be better for Europe if the economies grew at an equal rate.

"If Germany is exporting somebody else is not," Wheeldon said. "That somebody that is not are the smaller countries within the euro zone economy. They are not benefitting in any way from the German strength. And of course if Germany is strong, then the euro gathers in strength - that makes it even worse for those countries that are struggling to make ends meet in the euro zone economy."

On August 13, the US commerce department said that retail sales had risen in July for the first time in three months, largely due to high car sales. US retail sales are important because they highlight private consumption, which accounts for around 70 per cent of the US economy, VOA reported.

But in China, economic growth appears to be slowing. Beijing said on August 11 that several government indicators had slowed slightly in July. This was a sign, according to analysts say, that the Chinese economy is beginning to cool after it grew rapidly in H1 2010.

"There's been much talk about Chinese growth momentum slowing. I would perhaps prefer to look at it in another way and say that what's happening in China is that Chinese growth is settling and that's probably a more beneficial point and one that economists tend to ignore," Wheeldon said.

The German economy is the largest in Europe. In 2009 it shrank by 4.9 per cent - its worst performance since World War 2.
 

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