LONDON – The recovery from recession in the 17-country eurozone nearly came to a grinding halt in the third-quarter, raising concerns that the region faces a long slog back from its five-year economic crisis.
Barely three months after emerging from its longest-ever recession, the eurozone barely grew at all in the July-September period.
Eurostat, the EU’s statistics agency, said the economy expanded 0.1 percent compared with the previous three-month period. That was in line with market expectations but below the previous quarter’s 0.3 percent rate.
The figures confirm that the eurozone’s recovery will be a long process that is prone to setbacks, despite signs of life in the rest of the global economy, notably in the United States. European debt levels, despite years of government cutbacks and tax increases, remain high, unemployment is at a record, and consumers are hesitant to reach for their wallets or purses.
As a result, few economists think the recovery in the eurozone can pick up a head of steam and become self-sustaining in the way it has in the U.S. In the third quarter, the U.S. grew at an annualized rate of 2.8 percent, compared with the eurozone’s rate of about 0.4 percent.
“The drop in the eurozone growth rate does not mean that the eurozone is heading back into recession, but it highlights that the recovery is fragile and, as yet, too slow to lead to a significant fall in unemployment,” said Marie Diron, senior economic adviser to EY, formerly known as Ernst & Young.
The weak economic backdrop is one reason why the European Central Bank cut its main interest rate last week to a record-low 0.25 percent. The other being low inflation. In the year to October, consumer prices were up only 0.7 percent, way down on the ECB’s mandate of keeping inflation just below 2 percent.
Though details were not provided for individual sectors, Thursday’s figures show the recovery slowed in the core economies, such as Germany and France, with mild improvements in countries in the so-called periphery, notably in Spain, which saw its nearly two-year recession end.
Germany’s economic growth slowed to a quarterly rate of 0.3 percent from 0.7 percent in the previous three-month period as exports dragged. For an economy that relies heavily on its high-value exporters, such as big car manufacturers like BMW and Daimler, that’s a sign of weak demand among its neighbors and possibly an indication that the recent high value of the euro has taken its toll.
In France, the situation was even more downbeat, with Europe’s second-largest economy after Germany posting a quarterly contraction of 0.1 percent. It’s not in recession, though, as it grew by 0.5 percent in the previous quarter — a recession is traditionally defined as two consecutive quarters of negative economic growth.