Friday

1st Jul 2022

Eurozone recession looming, as debt costs soar

Economic growth in the eurozone is slowing down, with the Netherlands and Cyprus heading back into recession, fresh quarterly statistics show.

Overall growth in the eurozone was at 0.2 percent in July-September compared to the previous three months - with the highest scores in Estonia, Germany and France, while the Netherlands and Cyprus slid back into recession and Belgium and Spain ground to a halt, Eurostat, the bloc's statistics office said Tuesday (15 November).

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

  • Lenders are having less and less trust in each other

The statistics did not include any data for Italy, Ireland, Greece, Malta, Luxembourg and Slovenia. But with dim economic forecasts by the EU, IMF and other international bodies, the eurozone seems to be heading towards a new recession, as people's incomes have been slashed by austerity measures, resulting in depressed consumption.

And despite the new 'technocratic' prime ministers in Greece and Italy, markets have continued to drive their borrowing costs up and have started to dump even triple-A-rated bonds from France, Austria, Finland and the Netherlands.

The premium paid by France and Austria compared to German bunds - the reference bond for traders - rose to a record of 192 and 184 basis points, respectively, above the threshold normally associated with triple-A countries. Belgium's AA+/Aa1 rating may also soon be downgraded as its bond spread over German debt reached a record of 314 basis points.

Italy's borrowing costs continue to stay high, with yields at seven percent for the second time in a week - a level deemed as bail-out territory. Spain also entered the danger zone, as its premium compared to Germany hit 482 basis points, above the 450 rate Irish and Portuguese yields reached before asking for an EU-IMF bail-out.

Finland and Dutch bonds also saw their premiums rise to 17 and 10 basis points, respectively, while Germany's premiums continue to fall, with ten-year yields now at 1.77 percent.

Acknowledging the bleak growth situation, EU Council chief Herman Van Rompuy on Tuesday claimed that the slow-down "is on average not due to fiscal consolidation." Instead, he blamed investors for "lack of confidence", as well as consumers and said that running large deficits "can therefore not be the answer to the current situation."

"We must be aware that public anxiety in Europe is mounting about the immediate economic and financial situation. People are growing concerned about their jobs, their savings and the future of their children. These concerns are legitimate and Europe needs to be responsive," he said.

But in terms of solutions, he came up with the same EU policies that have so far failed to spur growth and "reverse the vicious circle" - the EU's 2020 Agenda (a ten-year economic growth plan), the 'six pack' of economic rules aimed at tightening budget surveillance ,and using EU funds to spur growth.

Southern euro-countries worst hit by recession

The EU economy is expected to grind to a halt in the 27 member states and to contract by an average of 0.3% in the eurozone, with recession hitting Greece, Portugal, Italy and Spain worst, fresh EU forecasts show.

Opinion

'Older generation put a mortgage on my future'

The young people that grew up after the Cold War, must get involved in the discussion on the future of Europe. They are not afraid of disappearing borders and changing structures, writes Joop Hazenberg.

Green crime-fighting boss urgently required, key MEP says

The European Parliament approved last week a non-binding resolution on illegal logging, calling to extend the EU public prosecutor's mandate to also cover environmental crime. The lead MEP on the file has called for urgent implementation.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  2. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  3. Council of the EUEU: new rules on corporate sustainability reporting
  4. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  5. Reuters InstituteDigital News Report 2022
  6. EFBWW – EFBH – FETBBHow price increases affect construction workers

Latest News

  1. Czech presidency to fortify EU embrace of Ukraine
  2. Covid-profiting super rich should fight hunger, says UN food chief
  3. EU pollution and cancer — it doesn't have to be this way
  4. Israel smeared Palestinian activists, EU admits
  5. MEPs boycott awards over controversial sponsorship
  6. If Russia collapses — which states will break away?
  7. EU Parliament interpreters stage strike
  8. EU's post-Covid billions flowing into black hole

Join EUobserver

Support quality EU news

Join us