Eurozone in second recession since 2009

The eurozone debt crisis dragged the bloc into its second recession since 2009 in the third quarter, despite modest growth in Germany and France, data showed yesterday.

The French and German economies both managed 0.2% growth in the July-to-September period but their resilience could not save the 17-nation bloc from contraction as the likes of The Netherlands, Spain, Italy and Austria shrank.

Economic output in the eurozone fell 0.1% in the quarter, following a 0.2% drop in the second quarter.

Those two quarters of contraction put the eurozone’s€9.4 trillion economy back into recession, although Italy and Spain have been contracting for a year already and Greece is suffering an outright depression.

A rebound in Europe is still far off. The debt crisis that began in Greece in late 2009 is still reverberating around the globe and holding back a lasting recovery.

Analysts said even the eurozone’s top two economies were likely to succumb in the final three months of the year.

Most economists expect Germany to contract in the fourth quarter for the first time since the end of 2011. And where Germany goes, France is likely to follow.

For all of 2012, the European Commission sees the eurozone contracting 0.4%, while growing just 0.1% in 2013. Business surveys point to difficult times ahead and the public’s backlash to austerity polices is growing.

A Reuters poll of more than 70 economists predicted the bloc’s new recession will extend until the end of the year and 2013 promises little better than stagnation, in line with what the Commission is forecasting.

Conducted before yesterday’s data were released, the consensus was for a 2012 contraction of 0.5% and just 0.1% growth next year.

Millions of workers went on strike across Europe on Wednesday to protest at government spending cuts they say are driving the region into a deeper malaise but which Germany and the Commission say are crucial to healing the wounds of a decade-long, credit-fuelled boom.

“We are now getting into a double dip recession which is entirely self-made,” said Paul De Grauwe, an economist with the London School of Economics. “It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else,” he said.

The Commission says the eurozone’s economies will be much healthier overall next year than in 2009, which was the nadir of bloated budgets when Greece’s fiscal deficit reached a record 15.6% of GDP and Ireland was not far off at13.9%.

— Reuters