Eurozone slump enters 6th quarter
Published 15/05/2013 | 10:43
The recession across the eurozone has extended into its sixth quarter - longer than the calamitous slump in the financial crisis of 2008-9.
Eurostat, the EU's statistics office, said that nine of the 17 eurozone countries are in recession, with France a notable addition to the list. Overall, the region's economy contracted 0.2% in the January-March period from the previous three months.
Although that is an improvement on the previous quarter's 0.6% decline, it is 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 austerity measures have inflicted severe economic pain and social unrest. Unemployment across the eurozone is currently at a record of 12.1% - in some countries, such as Greece, it is as high as 27.2%.
Although this recession is not nearly as deep as the one in 2008-9, it is the longest in the history of the euro, which was launched 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.
There was also bad news for the wider 27-country EU. It too is now officially in recession after shrinking by 0.1% in the first quarter, following a 0.5% drop in the previous period.Other major economies have faltered this year but none are in recession. The annualized contraction in the eurozone of around 0.9% contrasts with the equivalent expansion of the US of 2.5%. Meanwhile, China, the world's number two economy, is growing around 8% a year.
For many analysts, that discrepancy highlights Europe's flawed economic approach since the end of the financial crisis. Instead of keeping the spending taps on - as the US has largely done - the region concentrated on austerity even though companies and consumers were not able to plug the gap left by the retrenching state.
However, there have been some recent indications that Europe's leaders are willing to ease up on their adherence to cuts and tax rises at a time of recession. Some countries, for example, are being given more time to meet certain economic and financial targets. But the malaise is now spreading to the core countries. Figures showed Germany, the largest economy, grew by a less-than-anticipated quarterly rate of 0.1%, largely because of a severe winter.
Germany's paltry growth still allowed it to avoid a recession following the previous quarter's 0.7% fall, when orders for the country's high-value good from its struggling euro neighbours declined. However, France, Europe's second-largest economy, has not avoided that fate. On the first anniversary of Francois Hollande becoming president, figures showed that the country's economy contracted by a quarterly rate of 0.2% for the second quarter running.