Eurozone recession is its longest yet

A man holds a 10-euro note at a market in Paris on Wednesday. France’s economy has fallen back into recession.

Associated Press

A man holds a 10-euro note at a market in Paris on Wednesday. France’s economy has fallen back into recession.

PARIS — The eurozone is now in its longest ever recession — a stubborn slump that has surpassed even the calamity that hit the region in the financial crisis of 2008-2009.

The European Union statistics office said Wednesday that nine of the 17 EU countries that use the euro are in recession, with France a notable addition to the list. Overall, the eurozone's economy contracted for the sixth straight quarter, shrinking by 0.2 percent in the January-March period from the previous three months.

Though the contraction is an improvement on the previous quarter's 0.6 percent decline, it's another unwelcome report for the single-currency bloc as it grapples with a debt crisis that has prompted governments to slash spending and raise taxes.

This recession is not nearly as deep as the one in 2008-2009, which ran for five quarters, but it is now the longest in the 14-year history of the euro. A recession is typically defined as two straight quarters of negative growth.

Austerity measures have inflicted severe economic pain and produced social unrest across the eurozone, where the average unemployment rate is a record 12.1 percent and higher in some places. In Spain, it's 26.7 percent and in Greece 27.2 percent.

Wednesday's report also brought bad news for the wider 27-country EU, which includes noneuro members such as Britain and Poland. The EU, too, is now 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.

With a population of more than half a billion people, the EU is the world's largest export market. If it remains stuck in reverse, companies in the United States and Asia will be hit. Last month, U.S.-based Ford Motor Co. lost $462 million in Europe and called the outlook there "uncertain." McDonald's saw its sales in Europe, the hamburger chain's biggest market outside the United States, fall 1.1 percent in the first quarter.

There have been some recent indications that Europe's leaders are willing to ease up on their adherence to cuts and tax increases at a time of recession. Some countries, for example, are being given more time to meet certain economic and financial targets.

Despite the latest relaxation of some deficit-reduction targets — and an easing of concerns over the debt crisis in financial markets — most economists think the eurozone will remain in recession in the second quarter.

Growth is expected to emerge in the second half of the year, but it isn't likely to amount to much. But the eurozone has been in recession 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 countries. Figures released 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.

This quarter 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.

Guillaume Cairou, CEO of the consultancy Didaxis and president of France's Club of Entrepreneurs, said the news that the country is in recession merely confirms the difficulties its businesses have long experienced.

"The situation of companies on the ground is grave and more serious today than in 2008," Cairou said in a written statement.

Eurozone recession is its longest yet 05/15/13 [Last modified: Wednesday, May 15, 2013 11:22pm]

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...