Eurozone shows signs of life
THE Bank of England’s downgrade of Britain’s growth may look to have been the most eye-catching piece of latest economic data and would have been even more significant a week ago.
But the more fascinating narrative is the apparent return to some kind of normality in the eurozone after almost five years of going nowhere fast.
Gradually European policymakers have been applying some cold poultices including super-low interest rates, quantitative easing and repairs to a still-injured banking system.
But the real difference appears to have been made by falling oil prices. Even accounting for the unreliability of first- quarter data the 0.6pc surge in French growth and the emergence of Italy from doldrums that began in 2011 looks to be encouraging.
As for Germany, Europe’s locomotive economy, it expanded by 0.3pc in the first three months, a similar figure to that in the UK.
Germany at present is being held back by exports which are much more significant to its economic performance than the UK. It should soon start to reap some benefits from the sharp decline in the value of the euro as a result of quantitative easing.
The most interesting numbers come from France and could mean that the long nightmare of President François Hollande is coming to an end. French consumer spending zipped up 1.6pc in the first quarter, bolstered by the decline in oil prices. As importantly, industrial production climbed at its fastest pace for four years. Italy enjoyed its first quarter of growth since the third quarter of 2011. Spain is leading the way with output expanding at 0.9pc.
However, Greece remains a laggard with production slipping a further 0.3pc in the first quarter. As worrying for Athens – and the world – it had to dip into its reserves of International Monetary Fund currency, known as special drawing rights, to make its €750m (£540m) loan repayment this week.
It is not unheard of for countries to use this ‘lender of the last resort’ facility but this suggests the situation is getting more desperate.
There are good reasons to applaud the unexpected upturn in the eurozone. The past five years have been painful with surging unemployment, especially among young people, and the rise of extremist parties across the Continent.
The most fearful have been in Hungary where the thuggish Jobbik is the main opposition. But there has also been a surge of support for Marine Le Pen’s Front National in France, which has been trying to distance itself from the extremist views of the past.
Paradoxically, the better numbers from Europe have coincided with the Bank of England lowering UK growth for this year from 2.9pc to 2.6pc. If the eurozone recovery proves to be more than statistical whimsy then that, together with mellow oil prices, low interest rates and the zip-up in confidence after the Conservative election victory should actually boost performance.
The stronger the growth, the higher the tax receipts and the less pressure on George Osborne to bludgeon the economy with swingeing budget cuts.
African schooling
THE reappointment of Justine Greening as International Development Secretary must be a good thing.
If Britain is going to keep to the UN commitment of spending 0.7pc of gross domestic product on foreign assistance, then Greening’s focus on using some of the funds to support private sector initiatives and UK enterprise ought to be respected.
That is not how it is being seen by the sometimes perverse non-governmental organisations (NGOs). Global Justice Now, which represents 100 NGOs, has written to World Bank President Jim Yong Kim objecting to his support for a chain of private low-fee, profit-making schools Bridge International Academies targeted at poor families in Kenya and Uganda.
DfID is an investor in Bridge and had put £75m into the project via its private sector arm CDC. Co-investors include Bill Gates and Pearson group (owner of the FT) and one of the world’s leading educational publishers and providers. The NGOs accuse Bridge of using ‘standardised teaching methods’ and strategies that target poor households ‘building on their aspiration to a better life’.
That doesn’t sound too terrible. Bringing private sector discipline to education in Africa and bypassing state institutions which have often been contaminated by corruption, must be an improvement for the families concerned.
It should be praised rather than denigrated.
Diamond rapped
WHILE we are focused on Africa, a word of sympathy for our old friend ‘Safari’ Bob Diamond.
Investors at his post-Barclays venture Atlas Mara have delivered a rebuke by casting an 8.8pc vote against his re-appointment at his African finance and banking venture. The rebels, advised by vote specialists Glass Lewis, have been fearful that the company’s audit committee is not sufficiently independent.
Barclays shareholders, in line for a swingeing £2bn of fines because of foreign- exchange rigging, may understand the concerns.