Investors in the French and Italian stockmarkets have also had an unpredictable year. The value of the Mibtel index in Italy has ranged from 15,125 to 19,103 so far in 2003. It closed yesterday at 18,502.
The French CAC 40 bottomed out at 2403 in March and peaked at 3214 in June. At the end of t
rading yesterday it was closer to its top than bottom with a value of 3089.
Research issued by Citigroup, an investment bank, on July 18th argued that investors are likely to benefit from shrinking stockmarkets in the region. “The bear market has abruptly stopped the rapid growth of the European equity markets. Privatisations and company share issues have been stalled by collapsing equity prices.”
At the same time the outlook for the euro-zone’s largest economy seems cautiously positive according to recent indicators. The Ifo Business Climate Index rose in June in both eastern and western Germany. In an accompanying report the Ifo Institute said: “Although no positive impulses are coming from the world economy, domestic demand appears to be strengthening, both in manufacturing investment and in retailing.”
Also the July ZEW indicator of economic sentiment gained almost 21 points from its June level, indicating an economic upswing for the beginning of 2004.
Reform needed
Yet analysts generally agree that reform of Germany’s infrastructure is vital to economic recovery. While a consensus has emerged among most of the country’s citizens that health care and labour reforms are necessary the practical application is likely to be a drawn-out process.
A mid-month report by a team of economists, commissioned by Romano Prodi, the president of the European Commission, highlighted the need for Europe to focus on economic growth. To do so it said the EU must cut back the amount of its budget dedicated to the Common Agricultural Policy.
The euro-zone’s Stability and Growth Pact remains under fire. On July 14th – Bastille Day – Jacques Chirac, the president of France, called for the pact to be loosened in order to shore up the region’s suffering economies.
Only a few days before Gerhard Schroder, the chancellor of Germany, had suggested that the European Central Bank should step in to lower the value of the euro. Its soaring ascent this year against the dollar and the pound has hurt exporters, of which there are many in his country .
The ECB, which has resisted calls to intervene in the foreign exchange market, held interest rates at 2% when it met.
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