As a result, the recovery in the Irish economy lost considerable momentum over this period.
The good news is that economic conditions in Europe are showing signs of improvement. This is most obvious in the UK, where growth has picked up in the first half of the year, after the economy largely stagnated over the course of 2012.
GDP figures released last week show that the economy grew by 0.6% in the second quarter, having expanded by 0.3% in the opening quarter of the year.
Leading indicators of activity in the UK suggest the pick-up in the economy will be sustained in the second half of this year. The PMIs for both the UK manufacturing and service sectors, which are seen as good leading activity indicators, rose to their highest levels in over two years in June.
Recent CBI surveys also point to a continuing improvement in economic conditions. There are also signs of life in the UK housing market, with a pick-up in transaction activity, mortgage approvals, and house prices, as well as signs of improvement in the broader construction sector.
Meanwhile, there are signs the latest recession in the eurozone economy, which began in the final quarter of 2011, may have come to an end.
The eurozone contracted by 0.3% in the first quarter of this year, the sixth consecutive quarterly decline in output.
However, given signs of an improvement in retail sales and industrial production in recent months, the downturn in the economy may have bottomed out in the second quarter.
Again, looking at leading indicators, the preliminary PMI data for July suggest that the eurozone economy may have started to expand again. The composite PMI rose above the key 50 level in July for the first time in 18 months, signalling a return to growth.
Other leading indicators, such as the German Ifo index, French INSEE survey, and the European Commission’s economic sentiment index, have all been rising in recent months. These suggest the eurozone economy could return to growth in the second half of the year.
Another important export market for Ireland is the US. Here, GDP figures for the second quarter are due tomorrow. These are expected to show that the economy continues to grow at a modest pace, with GDP forecast to rise by around 0.3%, after registering growth of 0.4% in the first quarter.
Growth in the US economy has been held back in recent quarters by a tightening of fiscal policy, which has included both higher taxes and cutbacks in spending. However, the fiscal tightening has largely run its course. Thus, economic growth is expected to pick up momentum later this year and into 2014.
Certainly, labour market conditions continue to improve, with non-farm payrolls averaging job growth of around 200,000 per month in recent quarters and the unemployment rate edging lower. The jobless rate stood at 7.6% in June, down from 8.2% a year earlier.
New car sales in the US have continued to rise this year, while growth in non-auto retail sales has remained solid.
Consumer confidence has risen to its highest level in over five years, with a good recovery under way in the housing market too, as well as strong US stock markets.
Thus, all the indications are that the recovery in the US economy should gain momentum as fiscal tightening abates.
The improving trend in these key economies is good news for Ireland, which is very much depending on exports to drive its recovery in economic activity.