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December 18, 2013

Europe’s Economy Improves in 2013, but Challenges Remain

by Al Pessin

It was a better year for the economy in Europe, an important buyer of exports from around the world.  But, the crisis that has gripped the continent since 2008 is not over yet.
 
According to the statistics, Europe's economic crisis is stubbornly lingering into a sixth year.  But you wouldn't know it on London’s Oxford Street, the week before Christmas.

“I definitely feel that this year, in comparison to the last two to three years, I think the mood is that people can treat themselves and their family a bit better,” said Robert, a communications specialist.

“I think this year has been really good," said software saleswoman, Sandra.  "Also I think London is a bit of a bubble.  Things are really good in London, whereas if you go outside into other cities in Europe it may not be exactly the same case.”
 
She’s right.  Britain’s economy is among the strongest in Europe, and even here retailers introduced discounts well before Christmas.  In several countries that use the euro, the economic downturn is much more noticeable, according to Capital Economics analyst Ben May.
 
“Debt is still very high, as is unemployment," he said. "There’s a need for further austerity in some of these countries, and there’s a growing unwillingness amongst the population to accept that.”
 
That “unwillingness” has been reflected in protests, like this one in Greece, and at the ballot box, where voters in some countries have elected anti-austerity governments.  

Austerity is controversial even among economists because it hurts growth.  And Ben May says Europe's growth will continue to be weak in 2014, during what he calls a “grinding” and “fragile” recovery.
 
“The situation has improved in the eurozone, but I think there are still a lot of problems, and there’s plenty of scope for the region to lurch back into crisis,” he said.
 
Still, even beyond the relatively strong economies of Britain and Germany, there is reason for hope.  Professor Iain Begg of the London School of Economics says one positive sign is that talk of the euro system collapsing has all but ended.
 
“I’d say it was a year that European leaders will look back on with, if not affection, at least some satisfaction that things have improved," he said. "It doesn’t yet filter through into the sentiment on the street because incomes are stagnating, unemployment is still high.”
 
That was clear on Oxford Street, where many people said they were worried about the future, even as they spent money on Christmas presents.

“I won't do like crazy spending," said one man. "I’ll buy stuff for my kids, for my woman, and for my family as well, just a little present to say ‘Merry Christmas.’  But I’m not doing like crazy.”
 
That seems to reflect the views of many Europeans, as the continent emerges from five years of crisis to promises of prosperity many people have not yet seen, and are not convinced will come.