What is going on here?
As the end of summer literally gave way to autumn, euro area private sector growth was surprisingly weak.
What does this mean?
The Paris Olympics may have revitalized the European economy this summer, but the cheer is now a distant memory, and there is nothing to distract from the region’s weaknesses. German manufacturing, the backbone of the European economy, is struggling with weak demand and fierce competition. This is part of the reason why Europe’s private sector (services and manufacturing) contracted in September for the first time since March. In fact, the September index fell to a shocking 48.9, far worse than the modest drop to 50.5 that economists had expected, and enough to show that the economy is shrinking.
Why should you care?
The big picture: Actions, not just words.
Europe’s biggest challenges, from stagnant technological innovation to geopolitical fragility, aren’t just short-term obstacles but existential threats that must be addressed now. That’s why the former president of the European Central Bank recently hinted at a potential plan. The idea is for Europe to focus on three clear goals: spurring innovation by making it easier for tech companies to grow, lowering energy costs while remaining competitive in clean energy, and reducing reliance on foreign resources by building its own industry and defense. And with the latest data showing the region is only falling further and further behind, Europe might be wise to listen.
Marketed towards: Drama queens.
As if Europe needed any more drama, Italian bank UniCredit has plans to more than double its stake in Commerzbank. The bank wants to diversify away from the Italian market and is working on buying the German bank outright. But the German government isn’t too happy: its 12% stake is tiny compared to UniCredit’s 21%, and it’s understandably hesitant to let a foreign bank have influence over one of Germany’s largest financial institutions.
