A cheaper Euro does not necessarily mean cheaper liquidity will make its way to the real economy across the Eurozone’s member states. In that respect, the situation is worse in the southern periphery than in western and central-eastern Europe.

There is a growing divide between lending rates and the appetite to borrow between the Eurozone’s core and its periphery.

According to European Central Bank (ECB) data, while corporate lending is increasing in France (7,4%) and Germany (7,1%), it is shrinking in Italy (minus 1,3%) and Spain (1,7%). Declining levels of corporate lending may reflect diverging interest rates and a reluctance of corporates in the South to accumulate more debt.

Unemployment remains low across the Eurozone, albeit relatively high in Italy, Spain, and Greece. Manufacturing data seem to be collapsing across the Eurozone, with domestic consumption and the service sector unable to stop the overall negative trend.

The euro fell to a two-month low against the dollar on Wednesday with the single currency losing a cumulative 2% in July.

The weak Euro reflects the expectation of a relaunch of quantitative easing measures by the ECB, but also declining business confidence. Quantitative easing is supposed to make the cost of borrowing cheaper, to the benefit of EU industry. However, weaker demand and a global trade war mean there is little appetite for risk taking and investment.