Home' Trinidad and Tobago Guardian : August 14th 2013 Contents A25
Wednesday, August 14, 2013 www.guardian.co.tt Guardian
LONDON---The recession that s gripped the
eurozone since late 2011 is likely over.
Official figures to be released today are
expected to show that economic growth among
the 17 countries that use the euro inched up
0.2 per cent in the April-June quarter compared
with the previous quarter.
The increase is slight. But it would end six
straight quarters of a debilitating recession---
the longest to afflict the single-currency bloc
since its creation in 1999.
And it would represent an encouraging sign
for other economies, including the United
States, the world s largest, because the eurozone
is the world s biggest trading bloc. The euro-
zone s recession held back growth in the United
States, Japan and elsewhere as European con-
sumers and businesses spent less on goods
from those nations.
"Concerns about the eurozone were causing
a lot of companies to put investment on hold,"
said David Owen, chief European economist
at Jefferies International.
The eurozone s recession was a byproduct
of the debt crisis that engulfed the currency
union in 2010. The crisis forced debt-laden
governments to impose painful cuts, spooked
investors and raised doubts about the viability
of the eurozone. Shrunken government spend-
ing and higher taxes devastated living standards
in much of the eurozone, slowed economies
and drove the bloc s unemployment rate to a
record 12.1 per cent.
The austerity programs embraced by the
most troubled eurozone countries contrast
with more expansionary efforts in the United
States. The Federal Reserve has also been more
active than the European Central Bank in help-
ing the economy. It drove borrowing rates to
record lows once the financial crisis erupted
in 2008. Ultra-low US rates helped boost stock
prices and home sales.
US unemployment has dropped to 7.4 per
cent from ten per cent in late 2009 despite
a subpar economic recovery.
In recent months, the picture has brightened
in Europe as well as governments have shifted
their focus away from debt reduction. Industrial
production is rising. Consumer spending has
stabilised. Exports have increased as key trade
partners, including the United States and Japan,
Confidence has also recovered as stock and
bond markets have rallied. That s partly due
to the European Central Bank s pledge a year
ago to do "whatever it takes" to save the cur-
rency union and its decision to cut its main
interest rate to a record low of 0.5 per cent.
In Spain and Italy, for example, government
borrowing rates have sunk in the past year, a
sign of investor confidence. Analysts expect
today s figures to show improvement in both
countries, though both are likely to have
remained in recession.
Investors have bid up stock prices in key
eurozone countries this year. Stock indexes in
two major economies---France and Spain---
have reached 52-week highs. France s CAC 40
stock index has jumped 12 per cent this year
and Spain s IBEX seven per cent. Germany s
DAX index is up nearly ten per cent this year
and Italy s FTSE MIB nearly seven per cent.
Whatever growth is reported for the euro-
zone today is unlikely to be evenly spread out
across the bloc. The strongest economy, Ger-
many, is expected to post quarterly growth of
0.6 per cent, thanks to its high-value exporters.
Others continue to languish under the burden
of austerity policies.
Unemployment remains at stunning highs
in some countries---more than 26 per cent in
Greece and Spain, with youth unemployment
of around 60 per cent. Youth unemployment,
in addition to hindering economic growth, is
thought to contribute to crime and political
"While welcome news, much of the return
to growth is likely to be driven from Germany,
which is likely to be cold comfort to countries
like Spain, Italy and Greece buckling under
crippling levels of debt and unemployment,"
said Michael Hewson, senior market analyst
at CMC Markets.
Few economists think the indebted countries
can start producing German-style levels of
growth in the coming years. Burdens from
expensive public financing and unemployment
will likely continue to weigh on their
Yet for many people, even a mild improve-
ment is cause to celebrate, however tentatively,
and a suggestion that the darkest days are in
the past. As confidence rises that the eurozone
will expand, companies will be more likely to
open factories and retail space and consumers
will be more likely to spend. Companies in
the United States, which send 17 per cent of
their exports to the eurozone, stand to benefit.
"This will be good for the US economy,"
said Sung Won Sohn, an economics professor
at the Martin Smith School of Business at
California State University. (AP)
Eurozone turning a corner
as recession set to end
A European flag
waves in front of the
with the inscription
Volke' ('To The
German People') in
August 23, 2012.
Official data show
that Germany posted
a budget surplus for
the first half of this
year thanks to its
strong labour market,
even as other
deficits. AP PHOTO
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