Follow-up on real interest rates

I obviously picked the right time to ruminate on real interest rates. As regular readers know, I posted an article the other day that examined the impact that real interest rates would have on various economies.

I placed Germany in "Group 2", meaning that real interest rates had decreased moderately and this would help boost any economic output. Well the BBC has just reported that the German economy grew by 0.2% in Q1 2010. Eurostat has interpreted these figures to be a 1.5% growth in GDP over the past 12 months.

I placed Greece in "Group 4", meaning that monetary conditions had sharply deteriorated and that an increase in real interest rates would act to dampen any economic growth. The Wall Street Journal has reported Greek GDP declined by 0.8% in Q1 2010, while Eurostat sees it as a decline of 2.3% in GDP over the past 12 months.

You can download the Eurostat report (which the BBC and WSJ have reported from) here (pdf, 122kb).

Other "Group 2" nations include Spain (-1.3% but better than the previous 3 quarters), France (1.2% growth), Italy (0.6% growth) but nations like Ireland and Sweden have yet to have their GDPs reported. The Euro area itself has grown by 0.5%, which is good news, and has grown faster than the European Union generally (0.3% growth).

"Group 1" nations - those whose real interest rates were dropping too quickly and were in danger of inflation, include the UK, whose economy declined by 0.3% (thus developing into a "stagflationary" environment) . Switzerland and Iceland have yet to report.

The sole "Group 3" nation - Poland - has yet to report GDP too.

The fastest growing EU nation was Slovakia with 4.6% growth. Latvia is the worst, with -5.1% (following on from -17.1% the quarter before)

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