Eurozone’s powerhouse economies ensure recession grinds to timely halt
However, there is a long way to go
Europe’s recession is over.
If there wasn’t quite a bout of spontaneous rejoicing in the continent’s streets yesterday, there was much relief among all those who concern themselves with matters economic.
That the unusually long funk in the economy of the euro zone came to an end in the second quarter of the year, as the bloc’s gross domestic product expanded by 0.3 per cent compared to the January-March period, means there is the hope that momentum will build and sustained recovery can take hold.
German and French muscle
The rate of increase was marginally ahead of forecasters’ expectations because Germany and France, which together account for half of the zone’s output, grew considerably faster than anticipated.
The 0.7 and 0.5 per cent rises respectively were well above what other, narrower economic data series were pointing to.
The boost means that some of the ground lost since the euro zone’s double-dip recession began at the end of 2011 has been recovered.
Although because it has only clawed back about one-fifth of that lost output, and the bloc’s economy is still a full 3 per cent smaller than at its peak in early 2008, there is a very long way to go before matters improve for people’s lives, particularly in the hardest-hit periphery.
While the GDP figure looks promising, it is just one key indicator: others need to be taken into consideration as well.
More often than not analysts and journalists focus on the rate of unemployment when considering what is happening in the jobs market.
But this can give a less than rounded picture. Because that measure expresses the numbers unemployed as a percentage of those seeking work, it misses those who lose their jobs and leave the labour market.
A better measure of conditions is the number of people at work. Across the euro zone, total employment, at 140 million, has remained broadly stable since the crisis of the single currency erupted in 2010, having previously suffered a big fall during the “Great Recession” of 2008-2009.
But if employment has stagnated across the zone over the past three years, labour market performance in the bloc’s economies has diverged greatly.
While Germany has increased employment and France has kept the numbers at work steady, net employment in Ireland is an unprecedented 14 per cent below peak in 2007. Our employment collapse took place in 2008-2009, as the construction industry imploded and the economy went into freefall. But, as the chart shows, Irish employment has been much less affected by the euro crisis over the past three years than the other peripherals.