Economists in the European Union are scrambling to fix an impending economic meltdown following a shock plunge in Germany and France. The two leading EU countries suffered a dramatic economic slump after a business survey of the two countries was released. Emmanuel Macron and Angela Merkel were hit by weaker than expected figures, with fears that the two so-called “engines of Europe” could in fact drag down the bloc.
France and Germany dragged down eurozone growth as the weaker-than-expected data caused the euro to plummet in value against the US dollar and GB pound.
It was the eurozone’s weakest quarter of growth since early 2013.
According to the figures frmo IHS Markit, France’s private sector has “ground to a halt”.
Economists have blamed the slump in France on the recent protests and violent riots that have rocked the country.
The grassroots ‘yellow vest’ movement has protested against President Macron’s policies for several recent weeks, forcing a climbdown from the government.
The French leader, who had already cancelled planned fuel tax hikes, offered a rise in the minium wage, tax relief for pensioners and tax-free overtime work for workers in 2019.
The total package has been estimated by economists to cost around 15 billion euros, financed largely from government borrowing.
In Germany, private sector activity weakened to a four-year low as the central bank predicted the economy to slow in the coming years.
The shock economic figures comes just one day after the European Central Bank (ECB) ended its huge asset-buying scheme.
The ECB had claimed that the eurozone had sufficiently recovered from the currency crisis and was able to stand on its own.
The £2.3million, four-year-long bond buying programme has seen the ECB top up eurozone cash supply by purchasing millions of euros worth of assets each month.
ECB President Mario Draghi slashed growth forecasts for the bloc following the announcement, while also leaving interest rates on hold.
Jack Allen, a senior European economist at consultancy Capital Economics, said: “December’s fall in the eurozone composite PMI was almost entirely driven by a sharp drop in France, perhaps suggesting that the gilets jaunes protests have had a serious economic effect.
“But even if France’s PMI bounces back as the effects of the protests fade, the eurozone economy has clearly shifted down a gear and looks set to grow at a more moderate pace next year.”