Germany officially entered a state of recession last week as the rest of the Eurozone recorded stagnant growth. Recession, according to the economic consensus, is period of two successive quarters of negative growth.
But German chancellor Gerhard Schroder exuded insouciance: “I would not speak of a recession at this stage,” he told a TV interviewer when grilled about official data from the European Commission’s statistics arm, Eurostat. However, conceded Schroder, there had been “stagnation in the first two quarters”. He then reverted to Panglossian mode: “There are small but important indications that things could get better.”
The latest data from Eurostat paints a gloomy picture of the Eurozone – the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone – as a whole. It reflects zero growth during the quarter to June 30, compared with 0.1% growth in Q1.
Germany was not alone in the economic doldrums, joined by Italy as that nation slipped into recession for the first time in a decade – having recorded minus 0.1% growth for the second successive quarter. Bottom of the league table for slippage was The Netherlands which, although not officially in recession, notched a minus 0.5% decline in Q2, its most rapid in eleven years.
Eurozone manufacturers have been hard hit by the rise and rise in the value of the euro currency against the US dollar over the past eighteen months, pricing European exporters out of many markets.
A strong currency usually reflects a robust economy – paradoxically not the case in this instance. Instead it is the combined effects of 9/11 and the deliberately induced weakening of the dollar that has driven the international currency speculators to seek a safe haven for their pelf in euro-denominated bonds, thereby driving up the value of the euro currency.
Data sourced from: Telegraph.co.uk; additional content by WARC staff