Eurozone economy to keep on shrinking through 2013

posted at 7:21 pm on February 22, 2013 by Erika Johnsen

Not too long ago, the European Commission was predicting that the currency bloc would grow by at least 0.1% in 2013, but that unexpectedly larger-than-expected downward turn for the eurozone’s net growth last week means that even that piddling prediction is looking a little too rosy. The EU’s official economists are now forecasting that the eurozone economy will contract for a second year in a row and for the third year out of the past five, reports the WSJ:

The European Commission, the EU’s executive arm, forecast Friday a 0.3% contraction for 2013 and sees falling spending by businesses, consumers and national governments pushing euro-zone unemployment to a new high. Mass joblessness is expected to increase in the countries hardest hit by the crisis, with the average unemployment rate expected to reach 27% in Greece, 26.9% in Spain and 17.3% in Portugal. …

Unemployment will be a huge obstacle for governments as they attempt to carry out austerity programs that are partly responsible for the bloc’s dismal growth and employment situation.

Dang. A huge part of the EU’s attempt to tackle the issue, however, is getting member countries to abide by their by their deficit reduction targets — and France is kind of an important one in that 17-nation mix, seeing as how theirs is the eurozone’s second-largest economy. After watching their own economy contract last quarter, however, French President Hollande’s Socialist regime is looking to resist that push.

The first big test is likely to come in France, which the commission expects will miss a pledge to bring its deficit under 3% of gross domestic product by the end of this year. The forecast sees the French deficit this year at 3.7% of GDP. …

The commission uses the forecast each year to decide whether it will push for more cuts from national governments to hit previously agreed budget goals or whether it will allow the deficit targets to slip—a process that can result in fines for governments that refuse to cooperate. The government of French President François Hollande recently said it won’t push for more cuts to reach the 3% goal this year.

The EU has allowed for some leniency in deficit-reduction goals from other countries, and Hollande is looking for that same option — and Germany, the EU’s biggest economy, is not pleased about it. Via Reuters:

The schism dividing the euro zone’s strong and weak economies deepened to include its core pairing in February as French firms suffered their worst month in four years in stark contrast to prospering Germany. …

While businesses in Germany sustained a healthy rate of growth, French services companies fell into their worst slump since the nadir of the Great Recession in early 2009. …

“There are issues in the French economy which are being unmasked by the depth and severity of this crisis,” said Peter Dixon, global equities economist at Commerzbank.

He said France has major structural problems, and also said business activity may have been crimped by confusion over the government’s economic policies.

“That may well have been frightening the horses when it comes to businesses.”

France’s new Socialist government is having trouble engendering an optimistic business climate? Whaat?!


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the USA is trying to keep pace!

KOOLAID2 on February 22, 2013 at 7:24 PM

The outcome of Italy’s election may be rather interesting. If Sergio pulls an upset (the polls have him down) then Italy will proudly march in Greece’s footsteps. Not that the alternatives are sincere about fiscal restraint, but Berlesconi will open the doors wide open to social spending and taxation.

MJBrutus on February 22, 2013 at 7:29 PM

Whats going on over there? Have all the protests and riots stopped and everyone is back to sipping tea and crumpets..or is nothing being reported because socialists don’t want any focus on the fruits of their ideas?

Mimzey on February 22, 2013 at 7:31 PM

what a coincidence.

Lost in Jersey on February 22, 2013 at 7:35 PM

He said France has major structural problems, and also said business activity may have been crimped by confusion over the government’s economic policies.

Oh, there was no confusion, businesses rightly saw the confiscatory policies being planned by the socialist government and took appropriate steps to minimize exposure and losses. Funny that, people respond to policies that affect them negatively.

AZfederalist on February 22, 2013 at 7:51 PM

France’s new Socialist government is having trouble engendering an optimistic business climate? Whaat?!
====================================

The French,should contact Hopey for tips!!
(sarc)

canopfor on February 22, 2013 at 7:53 PM

Again, Germany regrets not building at least ONE tank factory during the Cold War years.

How many would it take, really? A couple of dozen, rolling behind a lead Rabbit flying a big “Fahrvergnügen” banner, ought to do the trick.

The French would be running so fast they wouldn’t even pause to be rude about it.

Adjoran on February 22, 2013 at 8:20 PM

Mimzey: The french wouldn’t sully themselves by eating an English Crumpet!! ;-)

Scrumpy on February 22, 2013 at 8:22 PM

Adjoran on February 22, 2013 at 8:20 PM

Hahahahahahahahaha so funny!!

Scrumpy on February 22, 2013 at 8:23 PM

The French would be running so fast they wouldn’t even pause to be rude about it.

Adjoran on February 22, 2013 at 8:20 PM

+100

Now that was funny.

AZfederalist on February 22, 2013 at 8:24 PM

Ok it’s been 10 mins since anyone last posted anything so here goes:

GIVING THE FINGER

Isn’t history more fun when you know something about it?

Giving the Finger Before the Battle of Agincourt in 1415, the French, anticipating victory over the English, proposed to cut off the middle finger of all captured English soldiers. Without the middle finger it would be impossible to draw the renowned English longbow and therefore be incapable of fighting in the future. This famous weapon was made of the native English Yew tree, and the act of drawing the longbow was known as “plucking the yew” (or “pluck yew”).

Much to the bewilderment of the French, the English won a major upset and began mocking the French by waving their middle fingers at the defeated French, saying, “See, we can still pluck yew! “PLUCK YEW!”

Since ‘pluck yew’ is rather difficult to say, the difficult consonant cluster at the beginning has gradually changed to a labiodental fricative ‘F’, and thus the words often used in conjunction with the one-finger-salute are mistakenly thought to have something to do with an intimate encounter. It is also because of the pheasant feathers on the arrows used with the longbow that the symbolic gesture is known as “giving the bird”.

And yew thought yew knew everything.

Scrumpy on February 22, 2013 at 8:36 PM

We really should start a pool to bet when the Eurozone ends and the various nations start printing their own currency again. The problem was not in the concept but in the fact that, in true European fashion, they established rules so that all partner nations would be contributors. And within months if not weeks they started breaking their own rules.

Happy Nomad on February 22, 2013 at 8:37 PM

The French would be running so fast they wouldn’t even pause to be rude about it.

Adjoran on February 22, 2013 at 8:20 PM

+100

Now that was funny.

AZfederalist on February 22, 2013 at 8:24 PM

I concur. Brilliant.

Lost in Jersey on February 22, 2013 at 8:43 PM


And yew thought yew knew everything.

Scrumpy on February 22, 2013 at 8:36 PM

Thanks. I didn’t know that one!

cheers

eon

eon on February 22, 2013 at 9:24 PM

All you need to know about Europe is that it thinks it’s a continent.

DarkCurrent on February 22, 2013 at 10:01 PM

Everyone knows it’s the Republican’s fault. Just ask Obama.

ButterflyDragon on February 22, 2013 at 10:18 PM

There is just no way anybody is going to paper over the deep cultural split between the Baltic/Atlantic cultures and the Mediterranean cultures of old Europe.
Especially with a treaty arrangement expressly designed to avoid a vote of the people involved. If I remember correctly, there were only three countries that ever voted on membership. Denmark rejected it and Ireland had to vote twice to get it passed.
I confess to a sketchy knowledge of EU history, but I believe that it was created by a bunch Euro-Bureaucrats and presented to each country as a treaty, subject only to ratification by the government, with the specific intention of avoiding any direct vote of the people.

Lew on February 22, 2013 at 10:39 PM

Engineering crises daily baby!!

Remind me what it was that Woodrow Wilson stated…

John Kettlewell on February 23, 2013 at 12:02 AM

The French would be running so fast they wouldn’t even pause to be rude about it.

Adjoran on February 22, 2013 at 8:20 PM

Hahahaha! Running faster than your nose after eating a hot pepper.

MelonCollie on February 23, 2013 at 12:14 AM