Eurozone back in recession

 
Anti-austerity protesters in Madrid, 14 November Millions of Europeans took industrial action on Wednesday

The eurozone is back in its second recession since 2009. Double dip is here.

Both France and Germany managed modest growth in the third quarter, but their economies are slowing. The eurozone's strongest economies cannot escape the ill winds blowing elsewhere.

Spain is now in the second year of recession. Its economy has been shrinking for 15 months. The economy which saw the biggest fall in the last quarter was the Netherlands - it shrank by 1.1%. Both northern and southern Europe are hurting.

The charge levelled at Germany and the European Commission is that they under-estimated the effects of austerity on output. There are signs that the Commission is backtracking. Spain is the latest country to be allowed to miss targets for reducing its deficit and to be granted a reprieve. Portugal and Greece have also been granted more time.

The eurozone is in a bind. Its policy is to reduce deficits and to adopt structural reforms, such as greater flexibility in the labour market. The heart of the problem, however, is the lack of competitiveness of many southern countries in relation to Germany. The gap cannot be narrowed by devaluation in a monetary union. The only option is to slash wages and pensions and to reduce unit labour costs. That, of course, weakens demand and pushes countries further into recession.

That is what is driving the massive protests - the sense that countries face years of hardship. The single currency is not seen as delivering higher living standards, but pain. And next year the European Commission sees growth of 0.1% at best.

There are some green shoots: Spain and Portugal's exports are doing well, but it is doubtful that exports alone will return these countries to growth. What they may indicate is that over time some of the reforms will bring benefits, but Europe does not have time.

It was noticeable last night in Madrid that when Chancellor Angela Merkel's name was mentioned the boos echoed around the crowd. One of the leaders of the union which organised the protests said today "nothing is getting better. The situation is getting worse". The size of the crowds on the streets last night - maybe 300,000, maybe more - should serve as a warning that Europe's people will not be patient for ever.

The President of the European Central Bank, Mario Draghi, has spoken of "a slow, gradual, but also solid recovery". It does not feel that way and Europe's officials have a poor record in judging this crisis.

Today's figures and the street protests are likely to strengthen the hands of those who say the current policy is damaging Europe's economy.

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 254.

    251.
    Chris London
    5 Minutes ago
    245.the_Sluiceterer
    "In fact the UK forecast is very much in the upper quartile. So they are not looking in too bad a position."

    Classic example of the Right Wing Media altering the mindset.
    Upper quartile of a less disastrous situation is being peddled as great news with well over 2.5m unemployed in the UK (figures do not reflect part time. ephemeral jobs).

  • rate this
    +1

    Comment number 253.

    96.DavidinUSA ‘If I’m a drunken gambling addict & my friends forcibly drag me from the casino, slap my face, give me a coffee & say ”Stop spending borrowed money”- is that being “austere”?’

    This is not what is happening. The drunken gambling addict is being given more loans to pay for his habit, whilst everyone living in his street is being forced to pay off his debt.

  • rate this
    -1

    Comment number 252.

    Chryses @236
    "responsible"
    All of us "responsible", of course
    Even those 'adding & correcting', or 'in charge'!

    We might here labour, in case helpful or of interest in any constructive vein, again to extract confessions of belief and faith, in each other's existence and the worth of caring: but the class has to get on, some to 'repeat the year', some to look for appreciation elsewhere

    Good luck!

  • rate this
    +1

    Comment number 251.

    245.the_Sluiceterer
    Glad you have a better quality of life but do get your facts rite. The UK entered into the second recession in 2012 it had not left the first in 2011. You are correct that forecasts for growth have been downgraded but this is in line with the rest of Europe. In fact the UK forecast is very much in the upper quartile. So they are not looking in too bad a position.

  • rate this
    -1

    Comment number 250.

    244.austriacus
    This may well be the case for Romania but I am assured they are not alone and more will voice their oposition if reductions are persuade. This could split the club into many factions. Unity is all well and good until the individual members see their slice of the pie diminish. The new members have seen what the others have milked out of the system and want their go under the cow.

  • rate this
    +1

    Comment number 249.

    Too many people are being brain washed by the Politically motivated Media into telling people that these economic sanctions are necessary - they are not. There is a lack of leadership a the top of influential Bodies like the IMF & ECB for co-ordinated corrective action to stimulate demand, so if all govts continue to follow the current path it will get even worse! Look at the UK ruined by Politics

  • rate this
    0

    Comment number 248.

    Yes we are in crises bat the Politician still not make the only move which will resolve the crises once for all THE CREATION OF ONE SINGLE EU STATE NOW NOT IN THE FUTURE this will be able the EU to create our economic model divorce from a now dead USA model and protect our unique way of life for the future generations.

  • rate this
    0

    Comment number 247.

    This is what happens when there is an imbalance of power in the hands of the Right Wing - these are self inflicted wounds. Doesn't take a genius to work out that if all the govts advocate austerity (which it is not - it is economic sanctions on its own Peoples) then there will be a lack of demand. These are Political ideologies being inflicted on its own for the good of the few against the many.

  • rate this
    +2

    Comment number 246.

    somthing has to change. It broke my heart on wednesday when a lady in spain jumped out of her 5th floor apartment whilst it was being re-possessed. I thought we are a civilised society I was obviously very wrong.

  • rate this
    +5

    Comment number 245.

    What about UK ?

    I live in Europe past 5 years & have better quality of life. The UK has been in double dip recesion since 2011. Some recent spin said there is now growth? but there is little evidence of this. Indeed latest forcasts suggest GDP to limp through a modest 0.6% rise having seem -4.9% in 2009. UK£ has lost 30% value v Euro in 10years. Sadly most of UK don`t hear truth only lies.

  • rate this
    0

    Comment number 244.

    Just read in Standard:

    Now Romania threatens next weeks EU budget frame meeting with veto, if EU support ( for agriculture etc.) 2014-2020 is reduced.

    What an achievement.

  • rate this
    -1

    Comment number 243.

    The crisis will never be resolved whilst the EU insists that all social and employment policies must be harmonised. Once public sector spending increased above, roughly, 35% of GDP it reduces growth. Each country must decide for itself how to balance growth and social security. It is obvious that Greece needs high growth

  • rate this
    0

    Comment number 242.

    "the current policy is damaging Europe's economy"

    Maybe, provided we aknowledge that the former policies have shown unsustainable. The Southern debt had to be stalled, the happy north->south export is no longer realistic. The South is on the way to expiate their guilt. Maybe time for the North to reconsider their strategies too?

  • rate this
    0

    Comment number 241.

    Back in recession? This craven desire to repeat basic statistics implies a far better situation than most Europeans have experienced over the past five years. If a person is suffering from the economic woes of political and corporate mismanagement, terms like "double dip recession" and "in/out of recession" have little or no meaning.

  • rate this
    0

    Comment number 240.

    The Greeks are responsible for their debt and their lack of budget responsibility. Any economist who is worth calling an economist could have told you that Greece should never have joined the Euro. What is needed now is for them to leave the Euro, devalue their currency and maybe sanity will prevail. The same could be said of Spain and Italy! Continued denial will mean continued suffering.

  • rate this
    +3

    Comment number 239.

    218.
    Chryses No the Greek debt was a carefully orchestrated each way debt by non other than Goldman Sachs. This same "bank" was involved in selling triple AAA rated packaged but toxic paper to Greece. Yes some in the Greek government were complicit, but the sea of financial sewage originated in the US banks.

  • rate this
    0

    Comment number 238.

  • rate this
    0

    Comment number 237.

    Regulators in European countries are trapping pools of liquidity held by branches and subsidiaries of banks based in other European countries. One example is Italy’s UniCredit, understood to be unable freely to use deposits gathered by its subsidiary, HypoVereinsbank. Supervisors in France and Britain are both also understood to be forcing foreign banks to hold large pools of liquidity.

  • rate this
    -2

    Comment number 236.

    All for All (234),

    Chryses@211
    ‘Foolish’

    Denying role of inequality: corruption, conflict of interest, greed in business, finance, regulation, govt? ..."

    Not at all, but they do not warrant your claim @208, that the U.S. & UK finance are responsible for Greece' s debt-load. You know perfectly well that Greece, Portugal, Italy, et. al are living with the results of their own excesses

  • rate this
    0

    Comment number 235.

    @ 180 Dr Bob Matthews
    Indeed.
    But then, US subprime mortgage bonds were rated triple-A up to the 2008 collapse, by the supposedly informed & dependable ratings agencies... so why not the UK?
    Make of it what you will, but there are interests other than "logic" that rule ratings.

 

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