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Eurozone in trouble?
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by Dave Keating | August 14, 2008 at 01:39 am
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Figures released today showed that the economies in the fifteen countries that use the euro - known as the eurozone - contracted by .2 percent between April and June. The news is likely to accelerate the steep drop that the euro has been experiencing on currency exchange markets over the past few weeks.
The data is heightening concerns that the eurozone is going to follow the US into a recession. The jury's still out as to whether continental Europe is immune to the financial woes being experienced in the US, but the latest data isn't promising. Reacting to the report, a German finance minister said Germany's economy could contract again in the next quarter. That would officially mean Germany is in a recession. And given that Germany is the main driver of growth in the eurozone and the dominating economy, that would likely mean recession for the whole zone.
The fifteen economies of the eurozone contracted by 0.2% between April and June, heightening fears that the euro area is sliding towards recession.
The German economy, Europe's largest, shrank by 0.5% in the second quarter compared with the first three months of the year, the first decline since 2004.
And in both France and Italy GDP shrank by 0.3% in the second quarter.
The downturn was largely driven by a decline in exports and a slowdown in consumer spending.
SECOND QUARTER GDP GROWTH Germany: -0.5% France: -0.3% Italy: -0.3% Spain: +0.1% Austria: +0.4% Source: Government statistics Exporters have been affected by the strength of the euro, which makes their products more expensive overseas, and a more general slowdown in global demand.
French finance minister Christine Lagarde, said the decline in the French economy in the second quarter "mostly reflects the deterioration of our international context, which particularly weighed on our exports and which is common to all European countries".
"The fundamentals of the French economy are healthy," she added.
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Dave Keating
London, United Kingdom
Most RecentMost Recommended Comments (2)
at 01:42 on August 14th, 2008
We need a global currency for all countries to be the same! I believe it would really help economically as well as Politically and may even help build peace and economic Justice around the globe!
at 16:52 on August 14th, 2008
For many people I know in Europe the mere introduction of the Euro signalled the start maybe not of a recession (negative growth) but of utter and total stagnation *after* devaluation of their money.
The US equivalent would be that starting tomorrow every 10 dollar bill is worth 5 while prices remain the same everywhere.