The euro-zone economy: The long road back

Posted: August 14, 2013 in economy
Tags: , ,

AT LONG last the second leg of the euro area’s double-dip recession seems to have come to an end. In the second quarter of this year, the euro zone grew by 0.3%, or a 1.2% annual pace. That marked the first rise in output since the third quarter of 2011. Olli Rehn, vice-president of the European Commission noted that “self-congratulatory statements suggesting ‘the crisis is over’ are not for today”, though he also mused that the figure “supports, in my view, the fundamentals of our crisis response”. Here is a bit of context—the path of real GDP for America and Britain since the fourth quarter of 2007:

And one should keep in mind that America’s economy is still operating with an estimated output gap, relative to potential, of about 5% of GDP.Still, growth is better than no growth. But there are many reasons to keep the corks in the champagne bottles for now. One is that euro-area expansion masks major internal divisions. Germany’s economy grew at a healthy clip in the second quarter, but the Greek, Italian, and Spanish economies are still stuck in recession. That is particularly worrying given that the periphery has lost the most economic ground over the past half decade; a Germany-powered recovery implies continued widening in living standards within the euro area.Once broad-based growth returns, the pace of the rebound will prove critical. The periphery has …

via Economic Crisis http://www.economist.com/blogs/freeexchange/2013/08/euro-zone-economy?fsrc=rss

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