Friday

7th May 2021

Eurozone still mired in recession

  • No growth until late-2013 warns Rehn (Photo: European Commission)

The eurozone economy shrank in the final three months of 2012, dealing a blow to those hoping that the bloc's recession had run its course.

According to estimates released on Thursday (14 February) by EU statistics agency Eurostat, economic output in the 17 eurozone countries fell by 0.6 per cent of GDP. This compares with a 0.5 per cent decline across the EU as a whole.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The figures completed a dismal year for the bloc, with the eurozone economy falling by 0.5 per cent over the course of 2012. Crisis hit Greece suffered the most, with a 6 per cent contraction over the course of 2012. However, Latvia, whose government announced its intentions earlier this month to become the next country to join the single currency, saw its economy grow by 5.7 per cent.

What will concern policy-makers most was the news that Germany and France, the eurozone's two largest economies, both saw declining output in the final months of 2012. Meanwhile, the Netherlands is now officially in recession after its second successive quarterly fall.

The dismal figures come after a number of EU leaders have voiced cautious optimism that the worst of the crisis may be over, with financial markets increasingly stable and narrowing bond spreads in the eurozone debt market.

The European Commission will publish its Winter Forecast next Friday (22 February) and is expected to give a mixed verdict on the state of the European economy.

In a letter to European finance ministers posted on the Commission's website on Tuesday (13 February), EU Economic commissioner Olli Rehn, said that economic growth would probably return in the second half of 2013. He cautioned that Europe's crippling unemployment rate, which currently stands at 12 per cent, was unlikely to fall. "There will inevitably be a lag before a strengthening of economic activity has an impact of job creation," he said.

Weaker economic forecasts are also likely to have a corresponding effect on national government targets to reduce budget deficits to the 3 per cent limit set out in the Stability and Growth Pact. However, Rehn raised the prospect of countries being given more time to meet the target if the economic climate remains severe.

"If growth deteriorates unexpectedly, a country may receive extra time to correct its budget deficit, provided it has delivered the agreed structural fiscal effort," he said.

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

UK downgrade rounds off EU's Black Friday

Rating agency Moody's stripped the UK of its coveted AAA credit rating on Friday (22 February), rounding off a day of economic gloom in the EU.

News in Brief

  1. Israel study: Two Pfizer doses give over 95% protection
  2. Barnier calls Johnson a 'bulldozer' in Brexit memoirs
  3. Hungary and Poland prevent 'gender' in summit declaration
  4. Draghi: Italy to welcome foreign tourists from mid-May
  5. Germany announces new, stricter, emission cuts
  6. Channel Islands 'blockade' threat in UK and France row
  7. French reporter kidnapped by rebels in Mali
  8. Trump's Facebook ban upheld but with caveats

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  2. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  3. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  4. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  5. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  6. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance

Latest News

  1. Greek prisons accused of abusing detainees
  2. EU and US join up against China on Taiwan
  3. Conservatives' Covid-strategy wins in lockdown-fatigue Madrid
  4. Commission drafts new rules targeting foreign state aid
  5. Why Europe should stop worrying about 'sportswashing'
  6. Conference on Future of Europe must listen to local voices
  7. What happens now to the EU's post-Covid recovery fund?
  8. EU turns from China to India on free trade

Join EUobserver

Support quality EU news

Join us