News / Europe

Germany Can't Stop Eurozone From Sinking Into Longest Recession

European Economic and Monetary Affairs Commissioner Olli Rehn presents the European Commission spring economic forecasts and outlook expectations for EU member states, in Brussels, May 3, 2013.
European Economic and Monetary Affairs Commissioner Olli Rehn presents the European Commission spring economic forecasts and outlook expectations for EU member states, in Brussels, May 3, 2013.
Reuters
Germany's economy crept back into growth at the start of the year but not by enough to stop the euro zone from contracting for a sixth straight quarter, and France slid into recession.

Falling output across the bloc meant the 17-nation economy is in its longest recession since records began in 1995.

It shrank 0.2 percent in the January to March period, the EU's statistics office Eurostat said on Wednesday, worse than the 0.1 percent contraction forecast by a Reuters poll.

 “The misery continues,'' said Carsten Brzeski, a senior economist at ING in Brussels. “Almost all core countries bar Germany are in recession and so far nothing has helped in stopping this downward spiral.

As well as France, the economy shrank for the quarter in Finland, Cyprus, Italy, The Netherlands, Portugal and Greece. Data last month showed Spain's economy contracted  for a seventh consecutive quarter.

Germany, which generates almost a third of the euro zone's economy, grew by a weaker than expected 0.1 percent, skirting the recession that France succumbed to, but highlighting the devastating impact of the euro zone's debt and banking crisis that has driven unemployment to a record 19 million people.

France's downturn was its first in four years, after contracting by 0.2 percent in the first three months of the year, as it did in the last quarter of 2012.

Italy, the euro zone's third largest economy, reported its seventh consecutive quarter of decline, the longest since records began in 1970.

The euro zone's recession is now longer than the five quarters of contraction that followed the global financial crisis in 2008/2009, although it is not as deep.

The euro fell to a six-week low against a buoyant dollar, hurt by the anemic figures which kept alive chances of more monetary easing by the European Central Bank.

 The ECB cut rates to a record low earlier this month and its head, Mario Draghi, said it was ready to act again if the economy worsened.

Some EU leaders, who meet for a summit in Brussels next week/ are also trying to shift away from the budget cuts that have dominated the response to the debt crisis since 2009.

But it will be tough for another rate cut and a softening of austerity - even if either happens - to break a cycle in which governments are cutting spending, companies are laying off staff, Europeans are buying less and young people have little hope of finding a job.

''Any recovery is going to be excruciatingly slow,” said Nick Kounis, head of macroeconomic research at ABN AMRO.

A Reuters poll of 65 economists suggested growth should return in the second half of this year, but there will no strong recovery until at least 2015.

Recovery?

Interest rates at a record low and the ECB's promise to buy the bonds of struggling governments have calmed talk of a euro zone break-up, driving up equities and cooling bond yields.

But the reality for companies and households is of tight credit and frozen investment, meaning demand in places such as China and the United States is the best hope for renewed growth.

Of most concern is the difference between Europe's two largest economies, Germany and France. It looks narrow over the first three months of the year, but European diplomats and officials fear France will continue to lag far behind, threatening the cohesion of the twin policy motor that has traditionally driven the European project.

French growth has faltered as unemployment undermines the confidence of both consumers and businesses, which are struggling to cope with government belt-tightening while Spain remains deep in the mire.

Even Germany will find it difficult to reach take-off speed alone. Its statistics office revised down its figure for the end of 2012 to show a contraction of 0.7 percent, from 0.6 percent.

Thomas Gitzel at VP Bank sees a stronger performance in the second quarter as construction, hit by the winter, bounces back.

''The current global economic backdrop makes a sustained recovery more unlikely. Difficulties in France and disappointing growth figures from China are strewing stones in the path of the Germany economy," added Gitzel. "Hopes of significantly higher growth could be premature.”

The latest GDP figures will add fuel to a burgeoning debate about how to balance the need to cut debt with measures to foster growth.

Italian and French leaders have been vocal in calling for an end to austerity and European Commission President Jose Manuel Barroso has said it has reached the limits of public acceptance.

You May Like

N. Korea Sentences American to 6 Years Hard Labor

Matthew Miller's brief trial Sunday comes two weeks after 24-year old Miller and two other American detainees appealed to the US government to help free them More

Pakistan Rejects Afghan Criticism of 480-kilometer Border Trench

Military spokesman tells VOA the project is part of administrative and security measures taken to secure the mountainous border with Afghanistan More

Photogallery Typhoon Kalmaegi Makes Landfall in Philippines

Storm makes landfall late Sunday, cutting power and communications lines and forcing people to flee to higher ground More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Scotland Independence Bid Stokes Global Interesti
X
Henry Ridgwell
September 12, 2014 8:35 PM
The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video Palestinians Turn to Rebuilding Gaza

After almost two months of conflict in Gaza, Palestinians are preparing to rebuild the isolated Mediterranean enclave with assistance from abroad. Meanwhile, an international human rights group has found that Israel likely violated international laws of war during some of its attacks on Gaza. Zlatica Hoke has more.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Middle Eastern Church Leaders Highlight Christians’ Plight

Patriarchs of Eastern Rite churches came to Washington this week to draw attention to the attacks against Christians in Syria, Iraq and elsewhere in the Middle East. VOA’s religion correspondent Jerome Socolovsky has more.
Video

Video Americans' Reaction Mixed on Obama Strategy for Islamic State Militants

President Barack Obama’s televised speech on how the United States plans to “degrade and destroy” the group known as the Islamic State reached a prime-time audience of millions. And it came as Americans appear more willing to embrace a bolder, tougher approach to foreign policy. VOA producer Katherine Gypson and reporter Jeff Seldin have this report from Washington.
Video

Video Authorities Allege LA Fashion Industry-Cartel Ties

U.S. officials say they have broken up crime rings that funneled tens of millions of dollars from Mexican drug cartels through fashion businesses in Los Angeles. Mike O'Sullivan reports that authorities announced nine arrests, as 1,000 law enforcement agents fanned out through the city on Wednesday.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid