Eurozone’s economy contracts more than expected, unexpectedly

posted at 12:41 pm on February 14, 2013 by Erika Johnsen

This does not bode well, in more than one way.

Via the NYT:

Economic output in the euro zone shrank more than expected in the fourth quarter of 2012, according to official data published Thursday, as Germany and France were caught up in a slump that was already well underway in countries like Spain and Italy.

The euro zone economy contracted 0.6 percent compared to the previous quarter, the third decline in a row. Except for the second quarter of last year, when growth among the 17 members of the currency union was zero, the euro zone has effectively been in recession since 2011.

Among all 27 members of the European Union, including countries like Britain or the Czech Republic that are not part of the euro zone, economic output fell 0.5 percent.

Economists had been expecting the downturn in the euro zone to end soon, but the figures published Thursday may signal that the recovery will take longer than they had thought. The euro fell by nearly a cent against the dollar in early trading Thursday as investors reassessed the prospects for growth.

Despite the supposed signs of business and consumer optimism that experts pointed to as evidence of Europe’s economy looking up, all of the bloc’s major economies miraculously managed to shrink — and it wasn’t just Spain and Italy, with their terrible unemployment situations, fueling the downturn either. Germany’s relative economic strength has been boosting up the whole bloc for some time now and was expecting at least a tiny bit of growth, but couldn’t manage it anymore under the flailing weight of their euro-partners.

President Obama is fond of pointing to the Eurozone’s economic mess as one of the “headwinds” working against America’s own growth, but of course this will all be blamed away on ‘austerity’ — instead of all of the horrible central planning that made the austerity inevitable in the first place — and used as part of the excuse for more government spending, I don’t doubt.


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but of course this will all be blamed away on ‘austerity’ — instead of all of the horrible central planning that made the austerity inevitable in the first place — and used as part of the excuse for more government spending, I don’t doubt.

Should The Government Stop Dumping Money Into A Giant Hole?

This used to be parody and now has become international policy.

sharrukin on February 14, 2013 at 12:49 PM

Obviously the EU needs to raise taxes and spend the money on wasteful and failing programs, because that always works out well.

Might I suggest the next green energy project: getting electricity from hamsters running in wheels.

rbj on February 14, 2013 at 12:50 PM

Just so I’m clear on the definition of “unexpected” – well, at least since George Bush was elected President in 2000.

Bad news for liberals = unexpected

Good news for conservatives = unexpected

perroviejo on February 14, 2013 at 12:55 PM

So much for retiring to Norway. :)

Bob's Kid on February 14, 2013 at 1:00 PM

What austerity? Unless austerity = tax hikes.

besser tot als rot on February 14, 2013 at 1:01 PM

Hey, Vince can only sell so many Sham Wows® You know they’re made in Germany.

Mr. Arrogant on February 14, 2013 at 1:02 PM

but of course this will all be blamed away on ‘austerity’ — instead of all of the horrible central planning that made the austerity inevitable in the first place — and used as part of the excuse for more government spending, I don’t doubt.

Despite the “Austerity = Tea Party/Austrian Economics! E113veNty!!!111!!!” hysteria by idiots and propagandists like Paul Krugman, Ezra Klein, et al, European Austerity has NOTHING in common with that espoused by limited government/low taxation/spending cuts Americans. European leaders – of all stripes – knew that it was/is far easier to raise taxes than reform unsustainable entitlement programmes and cut spending.

Labour bankrupted the UK during its 13 year reign. Did the coalition led by “Conservative” [True, "conservative" in Europe does not mean the same thing as "conservative" in the US save for a few like Daniel Hannan, Nigel Farage (UKIP, but more conservative than Cameron), etc)] cut taxes and spending? No, it has actually increased spending to a level higher than Blair-Brown, raised taxes, and postponed meaningful spending cuts…indefinitely. Government spending as a percentage of GDP in 2007 was 40.3%. It was 45.3% in 2012.

[In some fairness, Osborne has reduced the top marginal rate from 50pc to 45pc after the "sock it to the rich" tax resulted in a loss of revenues to the Treasury of £509 million in January 2012 compared to the same month in 2011.]

Did “Conservative” Sarko cut spending and taxes after the recession? No. In fact, in 2012, he proposed even more tax increases and pledged to “sock it to the rich” even more than Hollande would, if reelected. And, Hollande has just pumped Sarko’s economic policies/proposals with steroids.

France’s government spending as a percentage of GDP: 52.6% in 2007; 55.8% in 2012.

Berlusconi increased taxes and Italy has increased spending. 47.6% as a percentage of GDP in 2007 and 50.1% in 2012.

Even though Merkel did cut some spending in areas, she, too, increased taxes and government spending has continued to grow in others. Government spending as a percentage of GDP was 45.1% in 2012 and 43.5% in 2007.

Even Spain’s spending increased. 2007: 39.2%. 2012: 42.0%.

Over the last decade, EU member states have collectively increased government spending by 62%. In 2012, average government spending by EU nations stood at approximately 49.2% of GDP — v. 44.8% in 2000.

On its own website, the EU itself ridicules the notion of government austerity as a “myth.”

“National budgets are NOT decreasing their spending, they are increasing it,” the EU says, noting that in 2011, 23 of the 27 nations in the EU increased spending. This year (2012), 24 of 27 will do so.”

As is clearly apparent by OECD data, no country is spending below its 2004 level:

This Is The Dawning Of The Age Of “Austerity”?

Annual national accounts: Gross domestic product, OECD National Accounts Statistics (database)

Resist We Much on February 14, 2013 at 1:13 PM

Resist We Much on February 14, 2013 at 1:13 PM

Isn’t that what I said? Maybe not in so many words …

besser tot als rot on February 14, 2013 at 1:17 PM

Meanwhile

DarkCurrent on February 14, 2013 at 1:19 PM

This will be the U.S. in another year or two (or maybe six months).

RoadRunner on February 14, 2013 at 1:20 PM

So much for retiring to Norway. :)

Bob’s Kid on February 14, 2013 at 1:00 PM

Norway isn’t in the EU. It’s GDP was $414.461 billion in 2011 and $485.803 billion in 2012an increase of 17.2%.

Norway’s economy will grow 2.8 percent next year (2013) as record high oil and gas investments keep it insulated from the euro zone’s struggles, Statistics Norway said on Thursday, raising its growth forecast.

The economy will grow briskly for years and the red hot property market – the biggest risk in an otherwise model economy – will cool gradually, the agency said in a quarterly projection.

Three months ago the agency projected economic growth of 2.2 percent in 2013.

Norway GDP to grow briskly in 2013 on oil, gas investment-stats agency

Resist We Much on February 14, 2013 at 1:20 PM

Who cares if the economy tanks?

Get your free Obama phone here!

(Minnesota only at this link, but check around, they’re out there!)

http://www.freephonemn.org/program

Enjoy the Decline!

Bruno Strozek on February 14, 2013 at 1:21 PM

Isn’t that what I said? Maybe not in so many words …

besser tot als rot on February 14, 2013 at 1:17 PM

I didn’t read your post before I posted mine. I was replying to what Erika wrote.

After looking at your post, yes, it is. I just like to provide the data with links, which is irrefutable, so that when HAL, libenslavedthendie, etc, show up they can look it up for themselves.

Resist We Much on February 14, 2013 at 1:22 PM

Barry is bringing down the western economies.
(The Chinese economy is not to be believed…Commies cooking the books.)

Barry’s goal: Every one a Pakistani!

albill on February 14, 2013 at 1:22 PM

“Economists had been expecting …”

Exactly WHICH economists? I really dislike reporting like that where you are told “Economists say” or “Scientists say” without being told exactly which ones say that. If they actually told you which ones, you could gain some weighting of their opinion and know whether or not to believe it over time. They keep with this “unexpected” crap and yet never tell us which economists they are listening to. Maybe they should listen to some different ones.

But the purpose of it also is to manipulate your perceptions. They use this phrasing to give the impression that it is all economists. That it was the general opinion among the economics community.

crosspatch on February 14, 2013 at 1:31 PM

History proves that when things get bad enough in Europe we can expect another war.

Dollayo on February 14, 2013 at 1:35 PM

See, those Republicans are so damn evil, their talk of austerity not only led to a Q4 contraction here at home, but affected the economy of Europe as well!

ButterflyDragon on February 14, 2013 at 1:46 PM

Obama was heard yelling to Europe, “Wait up!”

Bevan on February 14, 2013 at 1:56 PM

The only thing preventing hyper inflation and collapsing of the dollar due to printing of trillions of dollars is that Europe sucks much more than us…

mnjg on February 14, 2013 at 1:57 PM

I didn’t read your post before I posted mine.

Resist We Much on February 14, 2013 at 1:22 PM

I was joking :) I’ll leave the hard work of finding the links to you and I’ll continue to rely on memory! Much easier.

besser tot als rot on February 14, 2013 at 1:58 PM

Norway GDP to grow briskly in 2013 on oil, gas investment-stats agency

Resist We Much on February 14, 2013 at 1:20 PM

Don’t forget whaling – that’s a growth industry.

besser tot als rot on February 14, 2013 at 1:59 PM

The euro zone economy contracted 0.6 percent compared to the previous quarter, the third decline in a row. Except for the second quarter of last year, when growth among the 17 members of the currency union was zero, the euro zone has effectively been in recession since 2011.

Just as a reminder, while euro zone GDP measures are seasonally-adjusted, they are not annualized like the reported US GDP. Reported in US terms, that’s a 2.4% annualized GDP drop.

OOPS!!!!

Steve Eggleston on February 14, 2013 at 1:59 PM

Check out this post over AEI:

http://www.aei-ideas.org/2013/02/europe-and-the-frog/

Check out how the US and European lines track. Doesn’t look good for us in 2013.

Also, check out the poll numbers for staying in the Euro – over 70% in each of Italy, Portugal, Spain, Ireland, and Greece (?!). (Yes, I know – I could have just said PIIGS – sue me.)

besser tot als rot on February 14, 2013 at 2:02 PM

(The Chinese economy is not to be believed…Commies cooking the books.)

albill on February 14, 2013 at 1:22 PM

Sure. I suppose you have plenty of first-hand observations to back up that assertion, right?

DarkCurrent on February 14, 2013 at 2:06 PM

Norway isn’t in the EU.

I do know that, I was just making a joke, assuming most people know that Norway is an exception to the usual European economic malaise despite their very high taxes. My pardon for not making it clearer. My son lives there and Norway is doing vry well indeed…until the oil money runs out, anyway. His generation will do great, my grandchildren’s will have to start making hard decisions.

Beautiful country, though, and really nice people.

Bob's Kid on February 14, 2013 at 3:02 PM

Norway isn’t in the EU. It’s GDP was $414.461 billion in 2011 and $485.803 billion in 2012 – an increase of 17.2%.

You know that ExxonMobil sales revenues are equal to the entire GDP of Norway… In fact Walmart Sales revenues are almost equal to the entire GDP of Norway…

mnjg on February 14, 2013 at 3:11 PM

I’m sure the Left will tell us this has absolutely nothing to do with the massive increases in the “use” of “renewable energy” in Europe over the past decade. Wind is Good!

Del Dolemonte on February 14, 2013 at 3:14 PM

You know that ExxonMobil sales revenues are equal to the entire GDP of Norway… In fact Walmart Sales revenues are almost equal to the entire GDP of Norway…

mnjg on February 14, 2013 at 3:11 PM

It has a population of 4,952,000. Nevertheless, the point was that Norway is NOT going into recession nor is it part of the EU.

Resist We Much on February 14, 2013 at 5:18 PM

I’m sure the Left will tell us this has absolutely nothing to do with the massive increases in the “use” of “renewable energy” in Europe over the past decade. Wind is Good!

Del Dolemonte on February 14, 2013 at 3:14 PM

Right. They’ll keep blaming it on austerity, because the MSM will parrot it. They’ll keep quoting “noble prize winning economist Paul Krugman says it’s caused by austerity” even when facts and the EU’s own analysis refutes it. They’ll keep saying the government are spending enough or the taxes are too low and America’s low information population will eat it up, believe it, and go back to watching Honey BooBoo or Moonshiners.

PastorJon on February 14, 2013 at 5:30 PM

government aren’t spending. Gah, lag.

PastorJon on February 14, 2013 at 5:31 PM