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Europe is Burning
Eurozone Leaves France in the Dust, Sarkozy Watches from the Sidelines

Manufacturing output in the Eurozone grew by the largest margin in more than two years last month, suggesting that some of the region’s troubled economies may finally be turning things around. A country-by-country sweep reveals more good news: Spain and Italy posted solid gains, while Greece’s contraction slowed down. But there was one big loser: France’s manufacturing sector contracted, raising concerns that it is losing ground to its neighbor across the Rhine. CNBC reports:

“The question point (for 2014) will be the divergence of economic performance across the euro zone this year — not only of the periphery versus the core, but the divergence among the members of the core. I’m particularly thinking about France and Germany here.”

[FX Strategy Chief Jeremy Stretch] added: “If you keep Germany out of the picture, where else does growth come from in the euro zone? This underline s the reliance the euro zone has on Germany both as the banker, tax payer and as the arbiter of growth in the euro zone.”

President Hollande’s poll numbers are already bad enough to make him the least popular President in the history of the Fifth Republic. News that France’s manufacturing numbers have fallen behind traditional basket cases like Greece and Italy aren’t likely to help him in this regard, nor is the international pressure on his government to do something about the country’s lack of competitiveness. If, as the FT reports, former President Sarkozy is plotting a comeback as early as this May, news like this could give him exactly the opening he needs.

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