Europe's stagnant economy is vulnerable to a shock from China

Posted Friday, 14 February 2020 ‐ CNN

London (CNN Business)Recession fears are stalking Europe again after Germany's economy flatlined at the end of 2019. The coronavirus now threatens to slam exports to China.The German economy did not grow in the final three months of last year, setting up the country for a difficult 2020 just when it was meant to begin experiencing a revival. Weakness in the world's fourth largest economy reverberated across the eurozone, where growth slumped to a seven-year low of 0.1% in final quarter of last year.That makes Europe especially vulnerable to the looming hit from the coronavirus outbreak. More than 64,000 people globally have been infected, and China's economy is still struggling to get moving again after the extended Lunar New Year holiday. "The [eurozone] economy should be about to turn a corner, but the coronavirus now means that [the first quarter] could well be a write-off," Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a research note.Germany was already in a feeble condition, logging growth of just 0.6% for the whole of 2019 amid weak global auto sales, the US-China trade war and uncertainty over Brexit. Economists thought that the economy, which has been held back by its manufacturing sector, would start to pick up early this year. Then came the outbreak of the novel coronavirus.China is the third biggest destination for German goods exports, and a drop in demand there is expected to further damage the country's factories. In 2018, the country exported goods worth nearly €94 billion ($101.6 billion) to China, more than four times as much as France.German carmakers, which do big business in China, are exposed: Major automakers sold fewer than 2 million cars in China last month, an 18% plunge from a year earlier."The impact from the coronavirus on the Chinese economy is likely to delay any rebound in the manufacturing sector as it at least temporarily disrupts supply chains," Carsten Brzeski, chief German economist at ING, wrote Friday.That's drummed up talk about a potential recession in Germany, or two consecutive quarters of negative growth. Deutsche Bank, in a note to clients earlier this week, called a recession in the first half of the year "quite probable."Andrew Kenningham, chief Europe economist at Capital Economics, said he thinks Germany's economy will remain at a standstill in the first half of 2020, which means a recession is "absolutely on the cards.""If you're forecasting zero [growth], then it's definitely fair to be talking about a potential recession," he said.That doesn't bode well for the rest of Europe.Kenningham predicts that economic growth in the eurozone will come in at 0.1% in the first quarter and 0.2% between April and June. Without momentum at the start of the year, he expects annual growth this year to be weaker than in 2019, when it was 1.2%.The full impact of the coronavirus on the global economy remains unclear, with little clarity about when the pace of infections will level off and begin to decline. In the meantime, workers in the world's second largest economy have had a hard time getting back to work, even as some bigger companies try to reopen their doors."Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy," Deutsche Bank said in its note.Should the situation continue to deteriorate, the European Central Bank may need to step in, pushing interest rates further into negative territory or increasing monthly bond purchases. President Christine Lagarde had started to review these unconventional policies, and the expectation had been for the central bank to keep policy on hold in the meantime.

Other articles published by CNN

Posted Friday, 21 February 2020 ‐ CNN

(CNN)The family of a Connecticut man fatally shot by a state trooper after a high-speed chase is planning to seek $10 million in a wrongful death claim against law enforcement authorities. Attorneys for the family of Mubarak Soulemane, 19, who was shot...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)Former acting Attorney General Matthew Whitaker warned Russia is "trying to interfere in 2020" during remarks at the Oxford Union in the UK on Friday, remarks that came after it was revealed that a Capitol Hill briefing on Russia's continued...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)Health care is a big issue for Democratic voters this year. But for Republicans, not so much.Most Democrats are focused on picking a candidate who can defeat President Donald Trump rather than one who comes closest to their views on issues,...

Posted Friday, 21 February 2020 ‐ CNN

James A. Gagliano is a CNN law enforcement analyst and retired FBI supervisory special agent. He is also an adjunct assistant professor and doctoral candidate at St. John's University in Queens, New York. Follow him on Twitter: @JamesAGagliano. The views ...

Posted Friday, 21 February 2020 ‐ CNN

New York (CNN Business)Cue up The Rembrandts and get ready to argue about if Ross and Rachel were on a break. The cast of "Friends" is reuniting on HBO Max.Jennifer Aniston, Courteney Cox, Lisa Kudrow, Matt LeBlanc, Matthew Perry, and David Schwimmer are ...

Posted Friday, 21 February 2020 ‐ CNN

Washington (CNN)US officials have told Sen. Bernie Sanders that Russia is trying to help his presidential campaign as part of their efforts to meddle with the Democratic primary contest, people familiar with the matter told The Washington Post.It remains ...

Posted Friday, 21 February 2020 ‐ CNN

New York (CNN Business)Marie Yovanovitch, the former United States ambassador to Ukraine who was a key witness in the impeachment inquiry into President Donald Trump, will author a book.Houghton Mifflin Harcourt, the publisher that acquired the deal,...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)Democratic presidential candidate Michael Bloomberg said Friday that women covered by three nondisclosure agreements who had made complaints against him can be released from those pacts if they contact his company.Bloomberg tweeted, "Bloomberg LP...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)They were responding to a report of a single bee sting. But their problem was about to get a whole lot worse.A group of firefighters and police that were responding to a bee sting were attacked Thursday afternoon by a swarm of nearly 40,000...

Posted Friday, 21 February 2020 ‐ CNN

New York (CNN Business)With the summer wedding season around the corner, the coronavirus outbreak could leave brides-to-be in panic: Some may be unable to get the wedding gown they want for their big day.China is a leading supplier of wedding gowns. As...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)Mike Bloomberg got into the Democratic primary, in large part, to stop Bernie Sanders.He may be doing the exact opposite.Sanders, after strong showings in Iowa and New Hampshire and with a slew of national polls showing him atop the field, is widely ...

Posted Friday, 21 February 2020 ‐ CNN

New York (CNN Business)It's not often that a company asks to end a tax break that is worth about $100 million a year. But Boeing is doing just that.It's not out of any sense of corporate largess that Boeing (BA) is seeking to end the tax break it has...

Posted Friday, 21 February 2020 ‐ CNN

(CNN)Some students at a New York university are in hot water over allegations they held what the school is describing as a "coronavirus-themed party."Officials at the University of Albany say they are investigating the event, which they called...

Posted Friday, 21 February 2020 ‐ CNN

Arick Wierson is a columnist with CNN, a six-time Emmy Award-winning television producer, and former senior media adviser to New York City Mayor Michael Bloomberg. He currently advises political and corporate clients in the United States, Africa and...

Posted Friday, 21 February 2020 ‐ CNN

New York (CNN Business)Wells Fargo was hit with a $3 billion fine Friday by federal authorities outraged by the millions of fake accounts created at the troubled bank over many years.The settlement with the Justice Department and Securities and Exchange...