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Germany Still a Bright Spot as Euro Zone Sputters

Consumer sentiment will remain weak across the euro zone as the region grapples with austerity, rising unemployment, and the specter of recession — apart from Germany, where the economic fundamentals are underpinning a rise in consumer spending, Bob Parker told CNBC.

European Union (EU) flags fly outside the the European Commission headquarters in Brussels.
Bloomberg
European Union (EU) flags fly outside the the European Commission headquarters in Brussels.

Speaking on “Squawk Box Europe,” Parker, senior advisor at Credit Suisse, said, “What we’re now seeing is a modest improvement in retail spending, and with the low unemployment — the German economy should grow at a minimum of 0.7 percent—I’m assuming spending will slowly improve.”

Germany’s March retail sales figures showed a rise of 0.8 percent month-on-month, 2.3 percent year-on-year. The country remains the euro zone’s economic powerhouse — as well as its political powerhouse — and as the region’s paymaster, it is watched closely, with its economy now being seen as a model to follow.

Spain has been placed firmly in the eye of the storm as focus has turned sharply to the Southern European nation, which is battling with tough budget deficit targets, rising unemployment and a discontented population. Last week saw the country piled under further pressure after it was downgraded two notches by Standard & Poor’s, the credit rating agency.

The main bone of contention with the German economic model has been the role of the consumer and the German spending habit, or lack thereof.

“We saw very weak spending in the last quarter of 2011 and going into the first two months of this year,” Parker said. “Arguably, that was surprising because Germany has seen a trend decline in unemployment, in contrast to everywhere else in the euro zone.”

Arnab Dasof Roubini Global Economics told CNBC that to enable any chance of a viable euro zone for the long term, a shift in economic and consumer patterns would need to be adopted there. He said, core countries need to increase their spending so that the periphery nations can export to them.

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