Eurozone: What goes around comes around


Five of the 17 members of the eurozone are now formally in recession.

Analysts think it's only a matter of time before many other major European economies join the list.

Together, European nations plunged into their first dip of recession back in 2008.

But since then, the real economy has been pushing the eurozone apart, even as politicians battle to pull it together.

Italy is producing about 7% less than it was before the crisis. Italy's national output shrank by nearly 0.75 percentage points in the second quarter alone.

Goldman Sachs graphic using Eurostat data

Goldman Sachs produced this graph using Eurostat data

But Germany's national output is now significantly larger than it was four years ago. It even grew in the three months to June - by 0.3%.

France has not grown at all since the start of the year.

German voters think they have paid a high price for the troubles of Greece and others. But German exporters have also been helped by the weakness of the euro.

If it were not for the single currency, the deutschmark would have been soaring over the past two years, and German exporters would have struggled to compete, like their Swiss neighbours today.

In the past few months, German exporters have still managed to sell their goods in Asia and the US, but they are being hit by falling demand in countries like Spain.

These latest figures from Eurostat show that other previously strong economies like Belgium and Finland have also been pulled down by the troubles of the periphery, and the shadow that the crisis has cast over nearly all of Europe's banks. (Incidentally, Chinese exporters to Europe are suffering as well.)

So, you might say, Germany is finally getting a taste of what the periphery has been going through for the past year or so.

But of course, many Germans would say they had already done so. They just "got their pain in early", in the years after the euro was created.

The most interesting feature of today's numbers - highlighted by economists at Jefferies - is that, for the first time, they put Germany's cumulative GDP growth since the start of the single currency ahead of the rest of the eurozone.

We can now say it has grown a whole 0.1% more than the other members of the single currency since 1999. Wow.

Real GDP growth since 1999

So, it's finally official. After 13 years with the single currency, Germany has been one of the winners.

"Tell us something we don't know," many on the periphery would respond.

But they, and we, will all lose if the uncertainty hanging over the euro's future continues to pull down the European economy.

Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 147.

    1 Declare for income wealth & work EQUALITY
    2Take the whole finance industry into public ownership.
    3 Take back, in their best assets, all public money (that shouldn't have been doled out) from the plc's in their best assets
    4 Declare bankrupt all firms that now are
    5Choose the rate of caital accummalation
    6Reallocate capital & income interpersonally and work intergenerationally

  • rate this

    Comment number 146.

    @143 further
    Have been hunting for trading volumes for UK T.Bills but am obviously not using the right search engine ...

    ... however, I did come across this that was interesting:

    The media have been presenting the FLS as a cash scheme, which it would appear it is definitely not!

  • rate this

    Comment number 145.

    This painful, & for those in the know, highly profitable, 'adjustment' (Merve's word in 2007/8) has the aims of impoverishing further the poor and reducing Chinese economic power. Lower EU Chinese imports is the first 'light for capitalism' at the end of the tunnel. The Euro is only a pawn in the game of US-UK finance.
    But finance capitalism can still be destroyed by its total public ownership.

  • rate this

    Comment number 144.

    Are you referring to Treasury Bills or to Gilts, such as Treasury Stock or Treasury Loan?

    It's a long time since I dealt with T.Bills as the former are known but I thought they had fallen more or less into disuse, being of value & use to highest rate taxpayers with large future tax debt commitments & liquidators who may be required to hold them.

  • rate this

    Comment number 143.

    One 'mistake' that is commonly used in hte narratives around the credit crunch overhang, is to claim that trhe banks did not know the value of their toxic debt. False. They knew but needed the uncertainty to encourage the bail out. ('Too much uncertainty in value to sell'')


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