The European Union released data on Friday showing that its member countries are experiencing better economic growth than expected, and the eurozone economy is finally surpassed its pre-crisis levels.
The European Commission’s statistics bureau’s data shows that the 19-nation bloc that uses the euro as its currency, which together make up the world’s second-largest economy, now has a bigger economy than it did before the start of the world financial crisis at the start of 2008. The figures from Eurostat show the eurozone’s economy grew 0.6 percent in the first three months of the year, double the 0.3 percent from the previous quarter, above analysts’ expectations of 0.4 percent. This is sharp contrast to the economic slowdown in both the UK and the U.S., as the Financial Times reported.
“Growth in the UK, the largest European economy outside the euro area, slipped to 0.4 per cent in the first quarter, while growth in the US over the same period was just 0.5 per cent when the figure was annualised.”
The eurozone has benefited mainly from the lowest oil prices in years, which benefited oil importers like Germany. The fall in the value of the euro has also been a boom for major exporters. Howard Archer of IHS Global Insight said the region should be able to sustain a growth of roughly 0.4 percent this quarter, but he warned that growth would likely decrease somewhere around June. BBC News said that “looser budgetary policies by governments” in the region have also “freed up resources in some of the region’s debt-laden economies.”
However, the good news comes with many somber footnotes, as the New York Times noted.
“Yet as milestones go, Europe’s return to precrisis levels of economic activity came with so many qualifiers that any celebration seemed premature, at best, and at worst like a mockery for the tens of millions of ordinary Europeans who have far from recovered. New unemployment data on Friday showed that the eurozone jobless rate, while edging down slightly, remained above 10 percent — more than twice the level in the United States.”
The strongest economies in the EU and the eurozone, such as Germany and the Netherlands, are major exporters and have rebounded quickly, but the countries hardest hit by the crisis, such as Greece, Cyprus, Ireland, and Italy, are still struggling with unemployment and slashed wages, the New York Times added.
“In Italy, disposable income for the average household — essentially, take-home pay — shrank 4 percent from 2008 to 2014, according to European Union data. Over those years, Greek households lost 24 percent of their disposable income, and Cyprus suffered declines of 22 percent. At the same time, German households gained more than 15 percent.”
Unemployment, while still dire, fell to 10.2 percent for the eurozone, the lowest rate in four and a half years but still three points higher than in 2008. The same set of data that shows the accelerating growth also shows that deflation returned to the bloc in April. The problem of jobs is particularly pronounced in troubled countries like Greece and Spain that have unemployment over 20 percent, mostly among young people.
The eurozone also has low inflation and high debts. Analysts have repeatedly said that inflation in the eurozone is far too low for a healthy modern-day capitalist economy. Energy prices fell 8.6 percent, while unprocessed foods rose 1.2 percent. Outside of those, consumer prices rose 0.8 percent, less than the 1 percent increase in March. The dip in inflation for services to below 1 percent stands in contrast to the European Central Bank’s target inflation of close to, but below 2 percent.
Eurostat shows the bloc has gone into deflation, or negative inflation, where goods and services become cheaper. While this may seem like a positive thing for consumers on the surface, it can spell big trouble for an economy if it goes on too long, since it encourages businesses and consumers to not spend money.
While the numbers have finally gone up, the region has a lot of work to do to fully recover from the worst global recession since World War II.
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