Shaky growth: EU slows to 0.2% in Q3
In the 17-nation euro currency bloc growth fell to just 0.1 percent, as recovery is still slowly stabilizing after a near 2-year recession, according to preliminary GDP data for Q3, released by the European Union Statistics Bureau, Eurostat on Thursday.
Modest growth was driven by a pickup in consumer spending, but public finances remain weak. Growth significantly slowed from the 0.3 percent in the second quarter of 2013.
Eurozone economic powerhouse Germany saw GDP rise 0.3 percent, which was exclusively driven by domestic demand, according to the Federal Statistics Office. Germany continues to be the main driver of growth, as consumer spending and exports remain healthy. The Bundesbank had predicted a slowdown in the third quarter, following "immense" 0.7 percent growth in Q2.
Germany’s industrial-based economy has kept it competitive in international trade, which has yielded an “excessive” 18.8 billion euros trade surplus, which has drawn jealousy from struggling neighbors. The 8 percent trade surplus is “in-depth review” by the European Commission to see if it is undermining the recovery of other European markets.
The review process is fairly routine - in 2012 the EC launched similar reviews of 13 EU countries, including Belgium, Finland, and Sweden.
Germany has come under fire for being too dependent on exports, and not stimulating enough domestic demand, which could be hindering growth across the rest of Europe.
Many EU 28 countries posted stellar growth in Q3- Romania increased 1.6 percent, Latvia 1.2 percent, the UK 0.8 percent, Poland 0.6 percent, Finland and Estonia 0.4 percent.
France’s economy fell flat and contracted 0.1 percent, as high taxes continue to cramp business expansion and push up unemployment.
France’s poor performance follows a credit rating downgrade by Standard & Poor’s agency on November 8, which cited poor economic growth prospects for Europe’s second-largest economy.
Many countries have officially excited recession- that is, posted grow for the first time after eight, even nine consecutive quarters of contraction.
Spain managed to emerge from recession posting 0.1 percent growth quarter-on-quarter between July and September, and France has declared an end to their recession as well.
Debt, unemployment, and weak exports still plague the continent, especially as periphery zones continue to contract. Unemployment across the euro currency zone is 12 percent, and more than double that in Spain and Greece.
The biggest contractions were in Cyprus, which contracted 0.8 percent, the Czech Republic by 0.5 percent, and Italy down 0.1 percent.
Data is not yet available for Denmark, Ireland, Greece, Luxembourg, Malta, Slovenia, and Sweden.
Much of Europe is still stabilizing after the 2 year recession, trying to find the right balance between spending and austerity. Unlike America, which is aggressively pumping stimulus into its economy, Europe, for the most part, has chosen austerity to cure the deep wounds of crisis.
Fearing stagnation, the European Central Bank unexpectedly cut interest rates to a record low of 0.25 percent on November 5th after inflation suddenly dropped to 0.7 in October, far below the targeted 2 percent, which stirred fears of deflation.
The European Commission has cut its growth forecast to 1.1 percent from 1.2 percent for 2013.