The recession across the economy of the 17 European Union countries that use the euro extended into its sixth quarter longer than the calamitous slump that hit the eurozone during the financial crisis of 2008-09.
Eurostat, the EU’s statistics office, said on Wednesday that nine of the 17 euro zone countries are in recession, with France a notable addition to the list. Overall, the eurozone economy contracted 0.2 percent in the January-March period from the previous three months.
Though that’s an improvement from the previous quarter’s 0.6 percent decline, it’s another unwelcome landmark for the single currency bloc, as it grapples with a debt crisis that prompted a number of governments to introduce austerity measures.
This recession, though not as deep as the one in 2008, is the longest in the history of the euro, which was launched in 1999. A recession is officially defined as two straight quarters of negative growth.
There was also bad news for the wider 27-country EU, which includes non-euro members such as Britain and Poland. It too is now officially in recession after shrinking by a quarterly rate of 0.1 percent in the first quarter, following a 0.5 percent drop in the previous period.
The euro zone has been shrinking since the fourth quarter of 2011. Initially it was just the countries at the forefront of its debt crisis, such as Greece and Portugal that were contracting.
But the malaise is now spreading to the so-called core. Figures on Wednesday showed Germany, Europe’s largest economy, grew by a less-than-anticipated quarterly rate of 0.1 percent, largely because of a severe winter.
France, Europe’s second-largest economy, has not avoided that fate. On the first anniversary of Francois Hollande becoming president, figures showed that France contracted by a quarterly rate of 0.2 percent for the second quarter running.
“We are in Europe, the euro zone countries are our main clients and our main suppliers, and when the environment around us is depressed, well, that’s the main factor in the slowing of the French economy,” French finance minister Pierre Moscovici said.
This marks the third time that France has been in recession since 2008, when a banking crisis pushed the global economy into its deepest contraction since World War II. And its outlook doesn’t appear to be too rosy.
Portugal’s recession deepened in the first quarter with gross domestic product (GDP) contracting 3.9 per cent from the same quarter last year, the statistics body INE said on Wednesday. GDP had shrunk 3.8 per cent in the previous quarter. INE attributed the decline to falling domestic consumption and investment.
The European Commission predicted Portugal’s GDP would shrink more than 2 per cent during all of 2013.
Similarly the gross domestic product (GDP) of Italy shrank 0.5 per cent quarter-on-quarter in the first three months of the year, the national statistics agency, Istat, said on Wednesday. It was the seventh consecutive quarter of negative growth for the euro zone’s third-largest economy, and the latest contraction was larger than expected. The consensus prediction among economists had been that GDP would contract 0.3 per cent. On a year-on-year basis, Italy’s economy shrank 2.3 per cent, it said.
The Rome-based agency said negative GDP figures were the result of shrinking activity in industry and services, which was not compensated by expanded output in agriculture.
“The economy will remain under pressure in the coming quarters from rising unemployment, tight credit and higher taxation,” said Zach Witton, economist at Moody’s Analytics.