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Strong growth in Europe 2:46
CNN's Charles Hodson speaks with Bank of America's Holger Schmieding about Europe's first-quarter growth
Well the Germany economy had no winter in January and February and as a result, construction was much stronger than usual this time of the year. On top of that, the consumers which had paused over Christmas return to the shops early in 2008, and that propelled German growth up.
What things are amazing that the rest are getting glum, certainly United States, certainly in Britain and one or two Euro-zone economies, but the Germany is doing so well, is it just a blip?
I think it is mostly a blip. We will probably see in the second and the third quarter that the growth trend is actually much weaker. On top of that, we yet have to see the full impact of the extremely strong Euro as well as of the extremely high oil price. So the start into 2008 was very good for Germany, less good for others, but even Germany is not gonna hold up going forward.
Well, certainly. What's sort of a role is the strong Euro gonna play again, looking more broadly, certainly in terms of exporting into the dollar zones, it's getting more and more difficult for this year Euro, Euro-zone company, isn't it ?
Yes. Euro-zone exports to the United States are already falling largely because US demand is so weak but also because the currency is starting to hurt and remind you it takes typically about nine months for the full impact of the exchange rate moves to come through. So we learned today that the Eurozone could cope with the exchange rates we had last summer. How the Eurozone will fare with the exchange rates of the last few months? We only have learned over this summer and the news is likely to be this exchange rate of the recent month has been too high.
OK, well, clearly that does give us grounds for pessimism in terms of the start of fall, the end of 2008, start of 2009. It may be that we might see kind of recession or certainly a sharp slowdown towards the end of the, um, essentially mirroring what's been happening in the United States right now this first quarter?
We'll probably see a sharp slowdown in the second quarter already extending onto close to the end of the year. Well, whereas at the same time, the US economy may hit bottom, so the economic fortunes of the two regions which currently are diverging a lot will probably converge with significant extend by the end of this year, yes.
Let's look at what is if you like the sick man of Europe, or at least the sick man of the Eurozone, and that, that is Spain, I mean, that is clearly suffering some punishment. Is it all housing related?
It is in Spain mostly housing related. Year over year, actually Spain is not doing that badly, they are still growing at an annual term at 2.7% rate. It is just that by their own standards that they have slowed down a lot and they will likely slow down to growth rates of no more than 1%, which is the current US pace within the next one or two quarters, for Spain that feels like real pain.
