LONDON – The 17-country eurozone has fallen back into recession for the first time in three years as the fallout from the region’s financial crisis was felt from Amsterdam to Athens.
And with surveys pointing to increasingly depressed conditions across the 17-member group at a time of austerity and high unemployment, the recession is forecast to deepen, and make the debt crisis — which has been calmer of late — even more difficult to handle.
Official figures Thursday showed that the eurozone contracted by 0.1 percent in the July to September period from the quarter before as economies including Germany and the Netherlands suffer from falling demand.
The decline reported by Eurostat, the EU’s statistics office, was in line with market expectations and follows on from the 0.2 percent fall recorded in the second quarter. As a result, the eurozone is technically in recession, commonly defined as two straight quarters of falling output.
The eurozone economy shrank at annual rate of 0.2 percent during the July-September quarter, according to calculations by Capital Economics.
“The eurozone economy will continue its decline in Q4 and probably well into 2013 too — a good backdrop for another debt crisis,” said Michael Taylor, an economist at Lombard Street Research.
Because of the eurozone’s grueling three-year debt crisis, the region has been the major focus of concern for the world economy. The eurozone economy is worth around $12.1 trillion, which puts it on a par with the U.S. The region, with its 332 million people, is the largest export customer for the U.S., and any fall-off in demand will hit order books.
While the U.S. has managed to bounce back from its own recession in 2008-09, albeit inconsistently, and China continues to post strong growth, Europe’s economies have been on a downward spiral — and there is little sign of any improvement in the near-term. Last week, the European Union’s executive arm forecast the eurozone’s economy would shrink 0.4 percent this year, and then only have a meager 0.1 percent growth in 2013.
The eurozone had avoided returning to recession since the financial crisis following the collapse of U.S. investment bank Lehman Brothers, mainly thanks to the strength of its largest single economy, Germany.
But even that country is now struggling as exports drain in light of the economic problems afflicting large chunks of the eurozone.
Germany’s economy grew 0.2 percent in the third quarter, down from a 0.3 percent increase in the previous quarter.
Germany’s Chancellor, Angela Merkel, tried to strike a positive note when she spoke to reporters in Berlin Thursday.
“I think we all are working on getting back on our feet again rapidly,” she said.
Perhaps the most dramatic decline among the eurozone’s members was seen in the Netherlands, which has imposed strict austerity measures. Its economy shrank 1.1 percent on the previous quarter.
Five eurozone countries are in recession — Greece, Spain, Italy, Portugal and Cyprus.