October is always a turbulent month, and I’m feeling uneasy about this one. The FTSE100 index, which looked set to break through 7,000 in September, has lost more than 500 points since then — and would have lost more but for manoeuvres in the mining sector. Pessimism stalks the bond markets, and even a falling oil price is read more as a harbinger of faltering growth than a stimulus for further recovery. Ebola is the new volcanic ash cloud, and attention is focused on the apparently incorrigible weakness of the eurozone — where the biggest problem is what was long seen as the most potent solution, namely the German economy.
Fiscal discipline, strict wage control and relentless pursuit of export success made Germany the locomotive of Europe for the single-currency era; but a 0.2 per cent GDP contraction in the second quarter combined with a plunge in exports over the summer indicate that the ‘dysfunctional’ Germans (to quote economist Philippe Legrain) may be about to join the irresponsible Italians in recession, with the fiscally undisciplined French close behind — bringing consequences for our own path back to prosperity, partly dependent as it is on continental trade.
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