-Raffaella Tenconi, an economist at Bank of America Merrill Lynch
While there were some negative data out of France earlier this week, with manufacturing and services PMI falling more than expected, French consumer confidence edged higher in June, as households have become more confident about their future finances. The consumer confidence index rose to 86 up from 85 reported in the previous month and six points higher compared to the same period a year ago, but still remaining below the long-term average of 100. Moreover, households' economic outlook for France improved, with the corresponding gauge rising 2 points, reaching the March level.
Meanwhile Italian borrowing costs plummeted to new lows, with its debt rising to the most ever. The country owed 5% more in April than in the previous year, with the debt swelling to 2.15 trillion euros, the official data of the Bank of Italy showed. According to Eurostat, that is the most of any country in Europe at the end of last year and matches the outstanding borrowing of Germany. While Europe's number one economy is expected to grow 2% this year, Italy will expand 0.3%. To ensure debt sustainability, Prime Minister Matteo Renzi is under pressure to implement spending cuts and drive growth in the nation's economy, burdened by deflation risks and historically high unemployment rate.
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