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.