Newspaper article International Herald Tribune

Economic Data Underscore Fragility of U.S. and Europe

Newspaper article International Herald Tribune

Economic Data Underscore Fragility of U.S. and Europe

Article excerpt

Countering hopes raised by the European Central Bank, Madrid reported even higher unemployment, while Berlin said it still opposed E.C.B. bond buying.

Spanish unemployment is at an all-time high and the U.S. economy has lost momentum, new data showed Friday, raising pressure for action by the chief central bankers on both sides of the Atlantic.

Stock markets essentially shrugged off the gloomy reports to rise for the second straight day. But the economic indicators were a reminder of how far from a true recovery Europe and the United States still are since the global financial crisis of 2008, and more than two years into the euro zone's debt debacle.

"You can't blame all of it on Europe -- we have our own problems yet," said Joshua Shapiro, the chief U.S. economist at MFR, a financial consulting firm, after the U.S. government released figures indicating the economy grew at an annual rate of only 1.5 percent in the second quarter.

But the U.S. economy is roaring compared to the weakest European states, including Spain, where the jobless rate reached a record 24.6 percent at the end of the second quarter. Spanish youth unemployment rose to 53 percent in the quarter, up seven percentage points from a year earlier.

The rise in Spanish unemployment underlines the challenge faced by the government of Prime Minister Mariano Rajoy to turn around an economy that is sinking further into recession.

Still, European investors for now seem to be putting their faith in Mario Draghi, the head of the European Central Bank, who on Thursday set off a stock market rally when he said the E.C.B. would do "whatever it takes" to preserve the euro currency union. Stocks in Europe rose again Friday.

The possibilities available to Mr. Draghi and the E.C.B. would include lowering interest rates yet again, and possibly buying the bonds of countries like Spain and Italy to help hold down their governments' borrowing costs.

The leaders of Germany and France on Friday added their weight to the battle to preserve the euro zone, when they issued a joint statement promising that they, too, would do everything they could to save the 17-country bloc. The statement from the German chancellor, Angela Merkel, and the French president, Francois Hollande, was brief and did not spell out any specific course of action. But it offered a show of unity by the leaders of the euro zone's two biggest economies.

"Germany and France are deeply committed to the integrity of the euro zone," the two leaders said in their statement, issued after they spoke by phone. "They are determined to do everything to protect the euro zone."

Whatever general gestures of good will Ms. Merkel might have in mind, though, any move by the E.C.B. to start a bond-buying program would meet resistance from her country's central bank. …

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