For the second time since 2009, the Eurozone has slipped into a recession:
(Reuters) – The debt crisis dragged the euro zone into its second recession since 2009 in the third quarter despite modest growth in Germany andFrance, data showed on Thursday.
The two leading economies both managed 0.2 percent 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 euro zone fell 0.1 percent in the quarter, following a 0.2-percent drop in the second quarter.
Those two quarters of contraction put the euro zone’s 9.4 trillion euro ($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 2009is still reverberating around the globe and holding back a lasting recovery from the Great Recession of 2008/2009 in much of the world.
“That was the last good number Germany for the time being,” said Joerg Kraemer, chief economist at Commerzbank. “The business climate … has caved in.”
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 euro zone contracting 0.4 percent, while growing just 0.1 percent in 2013. Business surveys point to difficult times ahead and the public’s backlash to austerity policies 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.
“We are now getting into a double dip recession which is entirely self-made,” said Paul De Grauwe, an economist with the London School of Economics. “It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else,” he said.
That may be true, but the fact is that Europe simply doesn’t have the resources to avoid the austerity that these workers are complaining about. Moreover, nations like Greece, Spain, and Italy have dug themselves into such a large hole thanks in no small part to their overly generous social welfare states that they really have no other choice but to enact these policies in order to get their house back in order. Finally, there are the political factors. Germany and France, the two nations that have been the lender of last resort for the Eurozone are both on the verge of recession themselves. They simply don’t have the ability to do whatever it is these protesters want them to do, and if those two nations slip into recession as expected, then things are likely to get worse in the rest of the Eurozone. At this point, one wonders why they’re continuing the Eurozone experiment to begin with.
