Periphery deep in recession as Germany soars
A TWO-SPEED Eurozone emerged in the first three months of this year with the region split more starkly than ever between recession-hit peripheral economies and strong northern countries, initial GDP estimates revealed yesterday.
Overall the currency area recorded no economic growth in the first quarter after the previous quarter’s 0.3 per cent drop, leaving output unchanged on the year and avoiding a technical recession by the smallest of margins.
But that figure masks dramatic differences between countries.
Germany saw GDP growth of 0.5 per cent in the quarter, rebounding strongly from a 0.2 per cent drop in the previous three months and holding up the full Eurozone figure.
An array of smaller economies also expanded – including Finland by 1.5 per cent, Latvia by 1.1 per cent and Belgium by 0.3 per cent.
However, Italy’s recession deepened, with GDP falling 0.8 per cent in the quarter, following drops of 0.7 per cent and 0.3 per cent in the previous quarters.
Spain officially entered recession with a second consecutive 0.3 per cent drop, and less detailed data from Greece showed a 6.8 per cent fall in GDP in the year to the quarter.
France saw GDP stay flat, with no growth in the quarter.
Economists said it is vital for peripheral countries to press on with economic reforms if they are to achieve German levels of growth in future, despite the short-term pain.
“Germany’s very strong figures are a reminder of the strongly positive long-term effects of austerity and structural reforms,” said Berenberg Bank’s Christian Schulz.
“Meanwhile, Europe needs to continue to manage the crisis to benefit from the reforms,” he said, pointing to the rebound in confidence experienced at the end of 2011 when leaders agreed to more fiscal discipline.