May 16, 2013

Europe endures longest slump

With 'core' countries now facing recession, analysts question the austerity approach.

The Associated Press

(Continued from page 1)

Growth is expected to emerge in the second half of the year, but it isn't likely to amount to much. Many economists warn of a lost decade ahead for the eurozone similar to the one endured by Japan, which, like the eurozone, has zigzagged in and out of recession over the past few years. In the fourth quarter of 2012, the last set of available figures, Japan's economy was flat.

The eurozone has been in recession since the fourth quarter of 2011. Initially it was just the countries at the forefront of its debt crisis, such as Greece and Portugal that were contracting.

But the malaise is now spreading to the so-called core countries. Figures released Wednesday showed Germany, Europe's largest economy, grew by a less-than-anticipated quarterly rate of 0.1 percent, largely because of a severe winter.

"The Achilles heel for the German economy right now is the weak demand for investment goods" such as industrial equipment and factory machinery, said Ralf Wiechers, economist for the German Engineering Association.

"No one knows where things are going in Europe."

Germany's paltry growth still allowed it to avoid a recession after orders for the country's high-value goods from its struggling euro neighbors declined.

However, France, Europe's second-largest economy, has not avoided that fate. On the first anniversary of Francois Hollande becoming president, figures showed that the country's economy contracted by a quarterly rate of 0.2 percent for the second quarter running.

"The eurozone countries are our main clients and our main suppliers," French Finance Minister Pierre Moscovici said.

This marks the third time that France has been in recession since 2008, when a banking crisis pushed the global economy into its deepest contraction since World War II.

Guillaume Cairou, CEO of the consultancy Didaxis and president of France's Club of Entrepreneurs, said the news that the country is in recession merely confirms the difficulties its businesses have long experienced.

"The situation of companies on the ground is grave and more serious today than in 2008," Cairou said in a written statement.

 

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