Every week at the Current we round up the biggest business stories. This week: the eurozone grows slightly, but Greek turmoil could threaten the economy; China’s regulators vow to stabilise the stock market; Canadian house prices could experience a correction; oil prices hit 6 year low
Eurozone economies grew by an average of around 0.3% in the second quarter of 2015, a slight drop from 0.4% from January to March. Inflation remained the same at 0.2%. Germany’s economy grew by 0.4%, a 0.1% increase from the previous quarter while Italy’s growth fell by the same margin to 0.2%. Malta had the most inflation at 1.2%. 11 of the eurozone’s 28 countries reported deflation, led by Cyprus with inflation at negative 2.4%
The Greek saga seems to be reaching a conclusion, at least for now as the country’s parliament approved the new bailout deal. The conditions of the bailout mean that Greece will have to impose more spending cuts and tax hikes. If the plan is approved by eurozone finance ministers then Greece will receive €85bn. Greece owes €3.2bn to the ECB by August 20th. The new bailout should lend further stability to the euro and eurozone economies after months of turmoil. Just how effective the bailout will be long term is still up for debate but it is certainly a step in the right direction.
Greece needs debt relief
Christine Lagarde, IMF chief, has urged Greek lenders to consider greater debt relief, claiming that the current proposals do not go far enough. The statement is a rare point of agreement for the IMF and more radical elements of the Greek left who also believe that the bailout will be ineffective without long term debt relief.
Stock market intervention
After months of turmoil China’s stock market regulators have said that they will continue to work to stabilise the Chinese stock market for years to come. The news brings mixed reactions. Stability is important to investors, but so is an open exchange free of government intervention. Earlier this month an 8.5% single day drop stunned investors. The country’s central bank has also devalued the yuan to a record low in what some commentators are claiming may be an attempt to boost exports.
Lenovo, a Chinese smartphone and computer manufacturer, has cut 3200 jobs after a disastrous 51% fall in profits. This is despite a 3% rise in revenue. The ailing giant points the finger at difficult market conditions in China and abroad. A lower yuan could help Lenovo cut costs and regain a competitive edge over foreign competitors.
The Canada Mortgage and Housing Corporation has declared that Toronto, Regina and Winnipeg are at risk of a housing price correction. In Toronto ballooning house prices have not been met with a corresponding rise in income and there is some evidence of over building. Vancouver, while home to some of the country’s most expensive property, is not at risk of a correction as the sky high prices are justified by sky high demand.
The risk of a housing correction is amplified by the weakened Canadian economy which has suffered from the consequences of low oil prices. On Thursday, for the first time in 6 years, North American oil prices dipped below $42 a barrel. A year ago oil prices were more than double that.
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