Throughout the recovery period European leaders have often looked to the export market for support, but evidence is mounting that recent actions by other central banks have hamstrung European exporters. This morning’s disappointing revelations of merchandise trade numbers from both France and Germany showed evidence that European goods are losing their edge in global markets. German exports fell 1.5% in February, the first decline in three months, while imports fell along the same trajectory they have followed for a similar period of time. The numbers out of France were comparatively worse.
This sign of weakness from the Eurozone’s two largest economies could prove a blessing in disguise, as frustration from the smaller members of the currency push German and French governing forces towards a more open stance on quantitative easing, or other accommodative, growth-oriented monetary policy. Draghi himself has shown an increasing level of interest in pursuing such policies, but has faced resistance from Germany and France, who desired to defend their own interests through implementation of selective austerity measures. There is little evidence that these nations plan to alter their stance on the issue of monetary policy, but mounting empirical evidence and pressure from external forces will likely force a renewed discussion of alternative methods of rebalancing.
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William Randall
KOTM Contributor
wrandall1@luc.edu