Eurozone narrowly avoids recession
The Eurozone just avoided recession in early 2012 but the region’s debt crisis sapped the life out of the French and Italian economies and widened a split with paymaster Germany.
Euro zone gross domestic product stagnated in the first quarter, the EU’s statistics office Eurostat said.
That was a touch better than forecast by economists, who had expected a 0.2 per cent slump, and dodging a technical recession following a 0.3 per cent contraction in the last three months of 2011.
A surprisingly strong 0.5 per cent expansion by Germany, Europe’s biggest economy, appeared to save the bloc from recession, even as the French economy stalled and Italy reported weaker-than-expected output that epitomised southern Europe’s anaemic economies.
“Germany is leading the bloc, but this doesn’t mean we will have a strong rebound, austerity is not going away and southern European economies are really struggling,” said Mads Koefoed, a senior economist at Saxo Bank. “We are looking at stagnation to very mild growth in the year to come,” he said.
Barely out of the 2009 financial crisis, businesses and households in much of Europe are hampered anew as governments cut back on spending to curtail budget deficits and companies freeze plans to invest.
Despite two summits this year and another planned for next week, EU leaders have been unable to find a way back to growth, while many southern Europeans are turning against austerity measures, holding huge street protests in Madrid and backing radical political parties in Greece’s recent elections.
Optimism in January that the Eurozone would recover quickly in 2012 has been crushed by unexpected contractions in manufacturing, consumer confidence and business morale, while one in 10 euro zone workers is out of a job.
“The euro zone economy… is not likely to recover any time soon,” said Jurgen Michels, an economist at Citigroup in London.