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6th Dec 2022

German growth too weak to lift eurozone from recession

  • The eurozone is in its longest recession since Eurostat began collecting data (Photo: Valentina Pop)

The eurozone economy continues to shrink as Germany's economy grew by a meagre 0.1 percent in the past three months, while France slid back into recession, according to data from the EU statistics office Eurostat published on Wednesday (15 May).

Shrinking by 0.2 percent in the first three months of 2013, the eurozone economy has now been in recession for the past one and a half years, the longest period since 1995, when Eurostat started collecting the data.

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The worst off are Greece - whose economy shrunk by 5.3 percent - and Portugal (-3.9%) compared to the same period last year.

France is also officially back in recession, after its economy shrank by 0.2 percent over the past six months, amid unemployment rates of over 10 percent and low business and consumer confidence. An economy is considered to be in recession if its economy shrinks two quarters in a row.

Meanwhile, Germany bounced back to growth after a three-month contraction at the end of 2012, but the 0.1 percent - mostly due to increased consumer spending - was not enough to put the overall eurozone economy back on the growth track.

The Eurostat data also shows the German economy shrunk by 0.3 percent when compared to the same period last year. The German statistics office blamed the poor performance on the "extreme winter weather" that lasted well into April.

At the opposite end, Latvia posted growth figures of 5.6 percent and Lithuania of 4.1 percent compared to the same period last year. Both countries are hoping to join the euro soon - Latvia in January and Lithuania in 2015.

Neighbouring Estonia, who joined the eurozone in 2011, had the highest growth in the eurozone compared to last year: 1.2 percent. But in comparison to the previous three months, the Estonian economy also shrunk by one percent.

Figures for Cyprus show that the country's economy has deteriorated dramatically over the period that its bailout was being negotiated: it shrank by 4.1 percent compared to January-March 2012.

Italy, Spain, Finland and the Netherlands also saw their economies shrink both compared to the previous quarter as well as the previous year.

The European Central Bank earlier this month lowered its key interest rate to a record low of 0.5 percent in a bid to jump-start the eurozone economy. But banks in southern European countries continue to lend money at much higher interest rates, with ECB chief Mario Draghi admitting that the cheap loans do not yet "trickle down" to the real economy.

IMF halves growth forecast for Germany

The IMF has halved its growth forecast for Germany to 0.3 percent this year "amid still elevated euro area uncertainty" and asked the economic powerhouse not to "overperform" on fiscal consolidation.

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