German industrial output and orders have disappointed, France is calling for an urgent injection of liquidity into the economy and Italy has slipped back into recession. Joanna Partridge reports on the ECB's reaction to a weakening picture in the euro zone, and heightened geopolitical risks.
The hot phase of the crisis was declared over - but all's still not well in the euro zone. The latest - worrying signs out of the region's engine, Germany. Europe's largest economy may have stalled in the second quarter - judging from June's industrial output data. It only just grew on the month and comes a day after figures showing industrial orders also fell in June. That's after Italy slipped into a triple-dip recession, and France's President Hollande called on Germany and the ECB to do more to boost growth. It's another factor increasing the pressure on ECB President Mario Draghi, says Alastair McCaig from IG. SOUNDBITE: Alastair McCaig, Market analyst, IG, saying (English): "Germany has been the one that quite frankly has been dragging the rest of the euro zone with them and the fact that they're beginning to buckle under the pressure of beginning to have to make up for deficits from the likes of say France is beginning to take its toll, and I guess the overhanging fears over what's going on with Ukraine and specifically the sanctions are beginning to really damage their figures." The ECB kept rates on hold at a record low, as it waits for earlier stimulus measures to take effect. Draghi didn't quite answer increasing calls from the markets to finally follow other central banks and adopt quantitative easing. But he gave what's being seen as a pre-commitment to QE, says Daragh Maher from HSBC. SOUNDBITE: Daragh Maher, Director of FX Strategy, HSBC, saying (English): "He seemed to say that we wouldn't spend all this time investigating what's the best way to do it if we weren't going to do it, but I won't precommit. But it's a bit like test driving a car, you test-drive a car five times and you do all the research, you're most likely going to go out and buy it in the end. So I think ABS will be the stepping stone and then I think early doors next year, if inflation's still holding this low." There's mounting pressure to act against falling inflation. But the Bank has been helped slightly by a weaker euro. Geopolitical concerns are weighing too. SOUNDBITE: Mario Draghi, President, European Central Bank, saying (English): "We have the Russian/Ukrainian crisis, Iraq, Gaza, Syria, Libya, so geopolitical risks are heightened, are higher than they were a few months ago. And some of them, like the situation in Ukraine and Russia will have a greater impact on the euro area than they certainly have on other parts of the world." Among all the disappointing data - one brighter spot. Euro zone retail sales rose at the fastest rate in seven years in June. Consumers are spending more despite concerns about continued high unemployment and economic prospects. The ECB expects domestic demand to contribute more to growth - but that alone won't be enough to get the recovery on a firmer footing.