2nd Jun 2020

Eurozone economy still in troubled waters

  • Growth is timid and elusive in the eurozone (Photo: Images_of_Money)

The eurozone economy grew by a meagre 0.1 percent in the last three months, showing that optimism about recovery from the crisis may be premature, according to data from the bloc's statistical office Eurostat published on Thursday (14 November).

Over the summer, the eurozone for the first time broke the 18-month recession cycle with a growth rate of 0.3 percent. This was expected to continue for the rest of the year.

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The main reason for the unexpected slowdown was France, whose economy shrank again in the third quarter by 0.1 percent.

This was despite predictions by the European Commission that the country will continue an upward trend, like in the previous three months when it grew by 0.5 percent.

French finance minister Pierre Moscovici struck an upbeat tone on Thursday in an interview with French radio: "The productive forces are starting up again, production is recovering."

"We knew the third quarter would mark a pause, it's not a surprise, it's not an indicator of decline, it's not a recession," he said.

Germany's growth rates were also weaker than expected: 0.3 percent compared to 0.7 percent in the previous quarter.

The German statistical office, Destatis, noted that the largest economy in the eurozone remained the main "motor" for recovery.

"The positive impulses in the third quarter came exclusively from within Germany," the German office said.

It blamed the slowdown on falling exports compared to the previous quarter.

Further south, Spain grew by 0.1 percent after shrinking the same amount in the second quarter while Italy contracted by 0.1 percent, a slowdown from the previous drop of 0.3 percent.

A strong euro, weakening exports and low purchasing power due to high unemployment rates are some of the factors dampening the recovery. These factors are similar to Japan in the 1990s. The Asian country's economy has been in a slump for two decades after a real estate bubble combined with high stock prices burst.

The European Central Bank last week took the unexpected decision to slash interest rates even further to a record low of 0.25 percent - a move seen largely as trying to prevent deflation in the 18-strong eurozone.

Whether that move is sufficient remains to be seen, with the EU commission still projecting a hopeful 1.1 percent growth for next year and 1.7 in 2015.

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

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