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Eurozone recovery falters


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Eurozone recovery falters

The eurozone economy all but stagnated in the third quarter of the year.

France’s recovery fizzling out and growth in Germany slowing.

France – where the economy contracted in three of the last four quarters – is becoming a focus for concern, with the government’s labour and pension reforms widely viewed as too timid.

The combined economy of the 17 countries sharing the euro expanded by a slower than expected 0.1 percent from the previous quarter.

German growth slowed to 0.3 percent, from a robust 0.7 in the second quarter.

France and Italy contracted by 0.1 percent

However analyst Fidel Helmer at the Frankfurt stock exchange wasn’t too worried, saying: “I don’t see this lower growth as dramatic, because it still is growth and next year we expect even better growth data.”

The eurozone remains plagued by record unemployment, a lack of consumer confidence and anaemic bank lending

And a breakdown of the German growth numbers showed the expansion there was fuelled by domestic demand as exports to the rest of the region faltered.

The European Commission forecasts the currency area will shrink by 0.4 percent over 2013 as a whole before growing by a modest 1.1 percent in 2014.

French worries

The Bank of France has predicted the country’s economy will expand by 0.4 percent in the last quarter of the year.

Hours before the latest growth figures were released, a report on French competitiveness by the Paris-based Organisation for Economic Cooperation and Development warned that it is falling behind southern European countries that have cut labour costs and become leaner and more productive.

“To reduce the economic lag and lost time, France needs to keep up structural reforms,” OECD chief Angel Gurria said.

The report will be hard for the government to ignore since it was commissioned by President Francois Hollande.

Compounding the French gloom, private sector payroll data showed some 17,000 jobs were destroyed in the third quarter, while inflation slowed in October to 0.7 percent, the weakest level in four years, when France was emerging from a deep recession.

Periphery mixed

Italy matched France’s performance, shrinking by 0.1 percent.

A senior Italian official told Reuters this week that the euro zone’s third largest economy would return to growth in the last three months of the year, expanding by as much as 0.5 percent and ending nine quarters of slippage.

Spain reported last month that it had pulled clear of recession in the third quarter, albeit with quarterly growth of just 0.1 percent, putting an end to a recession stretching back to early 2011.

Portugal is still struggling with austerity as part of its bailout plan yet managed to grow by 0.2 percent in the third quarter following stunning 1.1 percent expansion in Q2. Unlike other embattled euro zone states, unemployment has started to fall there too.

Cyprus, still in the midst of an austerity programme in return for being bailed out, contracted by 0.8 percent on the quarter while Greece’s deep recession eased a little.

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