Modest boost in eurozone may spell recession’s end
LONDON – The recession that’s gripped the eurozone since late 2011 is likely over.
Official figures today are expected to show that economic growth among the 17 countries that use the euro inched up 0.2 percent in the April-June quarter compared with the previous quarter.
The increase is slight. But it would end six straight quarters of a debilitating recession – the longest to afflict the single-currency bloc since its creation in 1999.
And it would represent an encouraging sign for other economies, including the United States, the world’s largest, because the eurozone is the world’s biggest trading bloc. The eurozone’s recession held back growth in the United States, Japan and elsewhere as European consumers and businesses spent less on goods from those nations.
“Concerns about the eurozone were causing a lot of companies to put investment on hold,” said David Owen, chief European economist at Jefferies International.
The eurozone’s recession was a byproduct of the debt crisis that engulfed the currency union in 2010. The crisis forced debt-laden governments to impose painful cuts, spooked investors and raised doubts about the viability of the eurozone. Shrunken government spending and higher taxes devastated living standards in much of the eurozone, slowed economies and drove the bloc’s unemployment rate to a record 12.1 percent.
In recent months, the picture has brightened in Europe as well as governments have shifted their focus away from debt reduction. Industrial production is rising. Consumer spending has stabilized. Exports have increased as key trade partners, including the United States and Japan, strengthen.
Confidence has also recovered as stock and bond markets have rallied. That’s partly due to the European Central Bank’s pledge a year ago to do “whatever it takes” to save the currency union and its decision to cut its main interest rate to a record low of 0.5 percent.
In Spain and Italy, for example, government borrowing rates have sunk in the past year, a sign of investor confidence. Analysts expect Wednesday’s figures to show improvement in both countries, though both are likely to have remained in recession.
Whatever growth is reported for the eurozone Wednesday is unlikely to be evenly spread out across the bloc. The strongest economy, Germany, is expected to post quarterly growth of 0.6 percent, thanks to its high-value exporters. Others continue to languish under the burden of austerity policies.
Few economists think the indebted countries can start producing German-style levels of growth in the coming years. Burdens from expensive public financing and unemployment will likely continue to weigh on their economies.
Yet for many people, even a mild improvement is cause to celebrate, however tentatively, and a suggestion that the darkest days are in the past.
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