The debt crisis dragged the eurozone into its second recession since 2009 in the third quarter despite modest growth in Germany and France, data showed on Thursday.
The two leading economies both managed 0.2 per cent growth in the July-to-September period.
But the resilience could not save the austerity-hit 17-nation bloc from overall contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.
Economic output in the eurozone fell 0.1 per cent in the quarter, following a 0.2-per cent drop in the second quarter.
Those two quarters of contraction put the eurozone’s €9.4 trillion ($12 trillion) economy in recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.
A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery from the Great Recession of 2008/2009 in much of the world.
Most economists expect Germany to contract in the fourth quarter for the first time since the end of 2011. Where Germany goes, France is likely to follow and economists expect its economy to shrink in the October-to-December period. For all of 2012, the European Commission sees the eurozone contracting 0.4 per cent, while growing just 0.1 per cent in 2013. Business surveys point to difficult times ahead and the public’s backlash to austerity polices is growing.
Millions of workers went on strike across Europe on Wednesday to protest the government spending cuts they say are driving the region into a deeper malaise but which Germany and the Commission say are crucial to healing the wounds of a decade-long, credit-fuelled boom.
The Commission says the eurozone’s economies will be much healthier overall next year than in 2009, which was the nadir of bloated budgets when Greece’s fiscal deficit reached a record 15.6 per cent and Ireland was not far off at 13.9 per cent.
There have been fledgling signs the Italian economy is improving. Consumer confidence has risen and the pace at which industrial output has fallen is slowing. Nonetheless, the country’s “acquired growth” at the end of the third quarter stood at -2.0 per cent, meaning that if GDP is flat in the final three months of the year, the economy will have shrunk by two per cent over the year as a whole.
Spain contracted 0.3 per cent in the third quarter. The Dutch economy shrank much more sharply than expected, by 1.1 per cent on a quarterly basis, the biggest drop in the quarter of any eurozone country. Austria’s economy contracted 0.1 per cent. Tiny Cyprus shrank 0.5 per cent.
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