As the last chance for the Greeks to avoid a fresh general election which may see them commit an act of joint economic suicide and create waves for the Eurozone and wider EU seems to have slipped by, better economic news is always welcome.
The better news comes in the shape of an announcement from Eurostat, the European Union’s statistical agency that the 17 nation strong block which uses the Euro has managed to avoid slipping into a technical recession – by the skin of its teeth. On the initial reading of the data, the Eurozone neither grew nor contracted in Q1, posting zero growth. However, zero growth is not a contraction and since the definition of a recession is two (or more) quarters where economic output contracts, the Eurozone has avoided a double-dip recession. The bloc as a whole contracted by 0.3% in Q4 2011, setting the risk of a technical recession.
With the bloc managing to tread water, there were clearly winners and losers in the individual performance of the member states. As we noted yesterday, Germany was the star performer managing to put on growth of 0.5% which beat analysts’ forecasts and ensured that the bloc avoided recession. The number 2 economy in the bloc, France, also managed a neutral growth position. On the negative side of the balance sheet, the troubled Italian economy shrank by 0.8%; its third quarter of contraction. Greece slipped further into the mire with a contraction of 6.2%. By comparison, the contraction of the Spanish economy by 0.3% in Q1 could be seen as a strong performance.
The lacklustre performance of the world’s largest trading bloc will fuel the argument that austerity measures need to be adjusted in favour of enhanced economic growth. This common sense position will now be championed by French President Francois Hollande. It is likely to gain traction because the political leadership of Europe is being slaughtered at the polls – vested self-interest will usually prevail.