‘Contagious’ Germany risks eurozone collapse while Brexit Britain ‘can be cured’
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The euro sank to a two-decade low versus the dollar on Tuesday as another surge in natural gas prices reignited worries about the health of the eurozone economy with data showing its business growth slowed sharply in June. Germany reported its first monthly trade deficit in three decades after the value of the country’s exports unexpectedly fell in May.
The euro tumbled 0.9 percent against the dollar to $1.0325, its weakest since December 2002. Versus the Swiss franc, it dropped 0.7 percent to 0.9941 francs, its lowest since 2015.
“It will continue to be very difficult for the euro to rally in any meaningful way with the energy picture worsening and risks to economic growth increasing notably,” said Derek Halpenny, an analyst at MUFG.
Survey data showed business growth across the eurozone slowed further last month and forward-looking indicators suggested the region could slip into decline this quarter as the cost of living crisis keeps consumers wary.
The dollar index gained 0.8 percent to 105.98, a new two-decade high for the currency.
Tuesday offers little in the way of key economic data but later this week both the US Federal Reserve and European Central Bank release their minutes from recent policy meetings and on Friday widely watched US payrolls data are published.
Eurozone government bond yields fell on uncertainty about the future path of monetary tightening by the European Central Bank and as investors fearful of the economic outlook sought safety.
In the UK, Boris Johnson has ordered ministers to hold regular press conferences on efforts to counter the rising cost of living.
Regular ministerial press conferences were a feature of the pandemic and the decision to restart them is a sign that No 10 is concerned about the public mood in the face of the squeeze on living standards.
Downing Street said the decision to hold televised briefings in the same way as during the Covid-19 crisis showed rising prices were being “treated with the same level of seriousness in terms of trying to address the problem”.
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Mr Johnson used Tuesday’s Cabinet meeting to tell ministers “tackling inflation and addressing cost-of-living pressures will remain the top priority, which is why we will be holding regular Government press conferences over the next six months to explain the details of different elements of the Government’s plan for the economy”, Downing Street said.
Asked whether it was a sign that the crisis was as serious as the Covid-19 pandemic, the Prime Minister’s official spokesman said: “It can be risky to draw equivalence, given we are talking about individuals who lost their lives, sadly.
“It is right that this is something that is a significant burden on people up and down the country, and indeed globally.”
At Tuesday’s Cabinet meeting, Mr Johnson highlighted the increase in national insurance thresholds coming into effect on Wednesday which will be worth around £330 to an average worker, with 30 million people set to benefit to some degree.
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He promised to “help people through the current difficult times”.
But writing for The Telegraph, associate editor Ben Wright pointed out: “The trouble is, Germany is the only major eurozone country that has consistently run a current account surplus.
“The longer it continues to post deficits, the greater the strain on the currency, which is already approaching parity with the dollar.
“The UK and German economies might both be unwell.
“But the British malaise appears easier to cure. What’s more, the eurozone’s shared currency means Germany’s sickness could be contagious.”
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