The European economy is showing few signs of concrete improvement in the third quarter, figures showed today.
Germany and Italy reported falls in retail sales despite better consumer morale in the euro zone's largest economy, while a survey of French industry showed investment prospects were weak, adding to the gloom after poor jobless figures.
In Germany, where high unemployment is suppressing demand, retail sales fell a monthly 1.6 per cent in July, dashing hopes better sentiment would translate into higher sales.
Market research company GfK said German consumer confidence was set to rise again in September with its gauge showing the third consecutive monthly rise but this was cold comfort.
Germany announced today its budget deficit would come in at 3.8 per cent of gross domestic product this year nearly a full point above EU rules as economic weakness gave it no choice but to allow borrowing to soar.
Its announcement drew a retort from European Union Monetary Affairs Commissioner Mr Pedro Solbes that countries in trouble over budget deficits were paying for not trimming deficits in times of plenty.
He admitted German had faced particular problems after reunification but said it could not expect special treatment and rejected criticism that the EU's Growth and Stability Pact, which seeks to cap deficits at 3 per cent, was too rigid.