Euro zone falls into second recession since 2009



Reuters

Published — Thursday 15 November 2012

Last update 15 November 2012 7:33 pm

| نسخة PDF Print News | A A

BRUSSELS/BERLIN: The debt crisis dragged the euro zone 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 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 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-fueled 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.
The Commission says the euro zone’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 percent and Ireland was not far off at 13.9 percent.
The threat of a euro zone break up has also diminished after the European Central Bank promised to buy euro zone government bonds in potentially unlimited amounts, should a country first seek help from the bloc’s permanent rescue fund.
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 percent, meaning that if GDP is flat in the final three months of the year, the economy will have shrunk by two percent over the year as a whole.
Spain, which has kept the euro zone on tenterhooks over a decision on whether or not to seek help from the euro zone rescue fund, is also in recession. It contracted 0.3 percent in the third quarter.
The Dutch economy shrank much more sharply than expected, by 1.1 percent on a quarterly basis, the biggest drop in the quarter of any euro zone country. Austria’s economy contracted 0.1 percent. Tiny Cyprus shrank 0.5 percent.
Figures out earlier this week showed the Portuguese economy shrank 0.8 percent quarter-on-quarter while Greece tumbled further, casting doubt on whether Athens and its lenders can come up with a credible plan to put its finances back on track.
But EU policymakers seem aware that government spending cuts cannot keep up at the current pace, particularly after shocking suicides in Spain by people who had their homes repossessed.
Spain’s Economy Minister Luis De Guindos has repeatedly called for EU-mandated budget cuts to take into account the euro zone’s recession, while Greece has been given two more years to make the cuts demanded of it.
“The last couple of days have created a new momentum for a change in policy, because up until this week, social tension was not part of the equation,” said Steen Jakobsen, chief economist at Saxobank. “It seems like the tone has shifted dramatically.”

What's happening around Saudi Arabia

RIYADH: Custodian of the Two Holy Mosques King Salman briefed the Cabinet, on Monday, about the message he sent to the Kuwaiti emir and the messages he received from the Moroccan king and the Qatari emir.The king also spoke about the outcome of his m...
RIYADH: The Eastern Mediterranean Office (EMRO) of the World Health Organization (WHO) on Monday announced that the region is considered a Zika virus-free zone.Dr. Alaa Alwan, the regional director of EMRO, said that it does not mean that Middle East...
JEDDAH: The Saudi Health Council is working to establish an electronic system to prevent manipulation of sick leave holidays.Dr. Yaqoob Al-Mazrouh, secretary-general of the council, disclosed this during a seminar on Sunday. He did not elaborate on h...
RIYADH: Specialized Clinics Arabia (SCA) treated a total of 9,220 Syrians at the Zaatari Refugee Camp in Jordan during the month of January 2016, according to Dr. Hamid Mufalana, SCA medical director.“Many of the patients were children who were given...
JEDDAH: The Jeddah police have solved the mystery surrounding the thrashing of a man by another, the video clip of which had gone viral.It was a Herculean task for the police to search for the victim, who had not bothered to lodge any complaint. The...
JEDDAH: The Cutoms Department at Yanbu’s Prince Abdul Mohsen bin Abdul Aziz Airport recently foiled an attempt to smuggle 64,165 Captagon pills found hidden in four boxes.Saad Al-Buqami, director-general of Customs at the Airport, said: “During our c...
AL-AHSA: Plans are afoot to turn the Al-Ahsa dates festival into an international event by adopting top standards in the manufacture, packaging and marketing of the product, Adel Al-Mulhim, the general supervisor of the festival, has said.Speaking du...
RIYADH: A gang comprising two women and youth has been arrested for allegedly looting cash from pharmacies and snatching women’s handbags in malls.Col. Fawaz bin Jameel Al-Maiman, police media spokesman of the Riyadh region, said the arrests were mad...
RIYADH: Riyadh Gov. Prince Faisal bin Bandar on Sunday called for conservation of water and electricity, even as the Water and Electricity minister said Saudi Arabia will need an investment of SR500 billion for power projects over the next 10 years t...
RIYADH: More than 200,000 people accused of various crimes were investigated by the Bureau of Investigation and Public Prosecution (BIPP) in the financial year of 1435-1436 A.H.Among the 218,000 who were investigated, around 30 percent or 65,000 were...
RIYADH: Thousands of Saudis have visited the German pavilion at the Janadriyah festival since it was opened by Custodian of the Two Holy Mosques King Salman last week, in the presence of German Foreign Minister Frank-Walter Steinmeier and German Amba...
DAMMAM: The cold wave in many parts of the Kingdom over the last week caused a decline of between 30 percent and 50 percent in farm production. This decline in turn drove prices of agricultural products at wholesale markets up by 30 percent.Farmers s...
RIYADH: The Ministry of Commerce and Industry warned on Monday that heating devices should have a voltage of 220 volts with a capacity not exceeding 2,500 watts.The announcement was made when MCI inspectors seized more than 3,000 substandard heating...
ALKHOBAR: Nearly 100 leading figures in the government and private institutions have completed training programs specializing in integrity and anti-corruption provided by the Saafah Foundation for Good Example in Riyadh, Jeddah and Alkhobar.The secre...
JEDDAH: Iraqi authorities executed in Baghdad on Sunday a Saudi prisoner, Abdullah Azam Al-Qahtani, 35, on charges described by his family as fabricated.Al-Qahtani had spent almost 13 years in the Iraqi prisons.Rumors about the execution of Al-Qahtan...

Stay Connected

Facebook