Finance & economics | Recession response

Europe’s economy is in a bad way. Policymakers need to react

Wage growth now appears to be fizzling out

A cyclist in Berlin.
A tricky point in the cycleImage: Getty Images

European stocks and bonds have had a lot to deal with in recent years, not least war, an energy crisis and surging inflation. Now things are looking up. Germany’s DAX index of shares has added 14% since the start of November. Yields on French ten-year government bonds have dropped from 3.5% in October to 2.6%. Even Italian yields have fallen below 4%, from 5% in mid-October. Investors are upbeat in part because inflation is falling faster than expected. Yet their mood also reflects a grimmer reality: the economy is so weak that surely interest-rate cuts are not far away.

This article appeared in the Finance & economics section of the print edition under the headline “Euro moans”

From the December 16th 2023 edition

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