China Business Blog - Aggregated China Business Blogs
Aggregated China Business Blogs
Eurozone sees longest slump since 2008-09 dire recession
Aggregated Source: Shanghai Daily: Business

THE recession across the economy of the 17 European Union countries that use the euro extended into its sixth quarter - longer than the calamitous slump that hit the region in the financial crisis of 2008-09.

Eurostat, the EU's statistics office, said yesterday that nine of the 17 eurozone countries are in recession, with France a notable addition to the list. Overall, the euro region's economy contracted 0.2 percent in the January-March period from the previous three months.

Though that's an improvement on the previous quarter's 0.6 percent drop, it's another unwelcome landmark for the single currency bloc as it grapples with a debt crisis which has forced governments to slash spending and raise taxes. These measures have inflicted severe economic pain and social unrest.

Though this recession is not nearly as deep as the one in 2008-09, it is the longest in the history of the euro, which was born in 1999. A recession is officially defined as two straight quarters of negative growth.

"The eurozone is facing a double blow from necessary restructuring of its domestic economy and somewhat disappointing growth in world trade, in particular demand from emerging markets," said Marie Diron, senior economic adviser to Ernst & Young.

Other major economies have faltered this year but none are in recession. The annualized contraction in the eurozone of around 0.9 percent contrasts with the equivalent expansion of the US of 2.5 percent.

There was also bad news for the wider 27-country EU, which includes non-euro members such as Britain and Poland. It too is now officially in recession after falling by a quarterly rate of 0.1 percent in the first quarter, following a 0.5 percent drop in the previous period.

With a population of more than half a billion people, the EU is the world's largest export market. If it remains stuck in reverse, order books for companies in the US and Asia will be hit. Last month, US-based Ford Motor Co lost US$462 million in Europe and called the outlook there "uncertain."

Most economists think the problems afflicting many countries in the eurozone will mean the region will remain in recession into the second quarter, before some growth begins to emerge in the second half of the year.

In its spring economic forecast, the EU's executive arm, the European Commission, predicted the eurozone will shrink 0.4 percent this year, better than the 0.6 percent drop in 2012.

The eurozone has been in recession since the fourth quarter of 2011. Initially it was just the countries at the forefront of its debt crisis, such as Greece and Portugal that were contracting.

But the malaise is now spreading to the so-called core countries. Figures yesterday showed Germany, Europe's largest economy, grew by a less-than-anticipated quarterly rate of 0.1 percent, largely because of a severe winter.

Germany's paltry growth still allowed it to avoid a recession following the previous quarter's 0.7 percent fall.


Original URL: Click here to visit original article
Copyright Shanghai Daily: Business