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Germany balances, French inflation slips

Wednesday, January 14, 2015 - 02:26

French inflation fell to its lowest in five years last month, piling more pressure on the ECB to take action to fight deflation risks and spur growth. But as David Pollard reports, Germany's approach to recovery is still at odds with others in the euro zone.

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For decades the euro zone economy's rotated on the Paris-Berlin axis. Latest news from both appears to put them poles apart. From France: data showing inflation at its lowest in five years. Consumer prices rising at a feeble 0.1 per cent in December. Tumbling oil prices are largely to blame. But after Greece announced a negative inflation rate of 2.6% there, it adds to a sense of urgency for a euro zone already dipping its toes in deflation, and for its central bank. Kathleen Brooks of Forex.com. (SOUNDBITE) (English) KATHLEEN BROOKS, DIRECTOR OF RESEARCH AT FOREX.COM, SAYING: ''This isn't just a problem affecting one or two members of the euro zone. It's affecting everyone, even Germany is going to be affected by this .... Obviously, France being the second largest economy in the euro zone, it's going to be a massive concern for Draghi.'' But Germany is giving itself a pat on the back. It's not only balanced its budget - but done so a year early. One senior member of Chancellor Angela Merkel's CDU Party saying the sacred 'Schwarze Null' - or zero deficit - showed Germany leading by example - by only spending money in its coffers. And finance minister Wolfgang Schäuble was cautious at best when asked whether it would mean an easing of fiscal policy. SOUNDBITE (German) WOLFGANG SCHÄUBLE, GERMAN FINANCE MINISTER, SAYING: ''If we can continue with this policy, then we'll gain room for additional investment. But once again, the condition is that we keep income and expenditure in balance.'' Germany's balancing act hasn't been enough to keep the euro from sinking again. It's fallen to below its 1999 launch rate. Helped to get there by the ECB getting crucial backing for a possible QE programme from a top EU legal advisor. Many see that coming on January 22cnd in one form or another. But even if it does come, the outlook is still littered with risk, much of it political. Italy without a president, Greece voting for a new government - as is Spain. (SOUNDBITE) (English) KATHLEEN BROOKS, DIRECTOR OF RESEARCH AT FOREX.COM, SAYING: ''If you get very radical left-wing parties all of a sudden in Spain for example, which is the fourth largest economy in the euro zone, you could end up with a lot of pressure and some real political clashes at the very top level of the euro zone with Germany and its austerity drive on one side and then some radical, left-leaning politicians having quite a lot of power in some rather large economies on the other.'' Latest opinion polls put Spain's leftist upstart Podemos in the lead - with over 28 percent of the vote - in the run-up to this year's general election.

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Germany balances, French inflation slips

Wednesday, January 14, 2015 - 02:26