Figures released from the EU’s statistical office, Eurostat, show that the Eurozone bloc has slipped back into recession. The 17 member group saw its economic activity contract by 0.1% in the third quarter, following on from a contraction of 0.2% in Q2.
As a whole, the wider EU managed to remain in growth in the third quarter, posting a modest expansion of 0.2% which reversed a contraction of 0.2% from Q2.
Within the Eurozone, economic performance, naturally, was mixed. Germany posted Q3 growth of 0.2% as did France. Italy, Spain and Portugal saw their economies shrink by 0.2, 0.3 and 0.8% respectively whereas the Greek economy contracted by a further 7.2% in Q3 2012 in comparison with the same quarter in 2011. A surprising contraction was seen in the Netherlands economy which saw the economy shrink by 1.1% in Q3. It has been suggested that this is a knock-on effect of austerity measures put in place by some southern European economies.
The UK managed growth of 1% in Q3, but contractions early in the year were partially, at least, attributable to the woes of the Eurozone dampening demand for UK goods and services. The Eurozone is the UK’s largest trading partner and therefore will be affected be affected by the fortunes of the bloc even though the UK is not part of the single currency.
This week has seen widespread protests across Europe against continuing austerity cuts and in favour of moves to create jobs – particularly for the hard-hit youth of the continent. Whilst it is true that the worst excesses of the European sovereign debt crisis have been focussed on national deficits, the problem of public debt has been with us for many years. It seems likely that political pressure will be rising to temper deficit reduction measures with policies which will promote growth. If handled properly, increased tax revenues from stronger growth could be used to off-set national deficits.