Europe, experts say, seems to be in policy paralysis. With Germany, the Continent’s economic heavyweight, in the grip of pre-election politicking, no big European policy moves are likely until after that country’s elections in September. Even then, it is not clear that anyone has any masterstrokes planned.
“The political situation in Europe is not conducive to making bazooka decisions,” said Gilles Moëc, an economist at Deutsche Bank in London, referring to an allusion by Henry M. Paulson Jr., a former U.S. Treasury secretary, to the need to have economic firepower in a crisis. “No one’s talking about creating any further jolts to the system.”
While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data Wednesday from Eurostat, the European Union’s statistical agency. The French president, François Hollande, marked the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism.
“Are we an isolated case?” Mr. Hollande said of France. “No, because the recession in Europe and particularly in the euro zone is greater.” But he offered no prescriptions for growth other than to say, “If Europe, member states and France organize ourselves to promote growth, then we can return to the hope of a better future.”
Organizing to promote growth, though, seems to be the mission that has long eluded the Union, whose listlessness contrasts with the performance of other major global economies.
Two weeks ago, the European Central Bank cut its benchmark interest rate target to a record low in a largely symbolic move, but gave no hint of whether it had more in store. Economists say there is a limit to what monetary policy can accomplish, in any case.
And the people perhaps most able to propose action — E.U. finance ministers — just spent two days in Brussels arguing over tax havens and debating a banking union, which is aimed at avoiding future disasters, not reviving growth.
“We don’t see policy makers lifting a finger anywhere in Europe,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York, said Wednesday. “But this is a depression, rather than a cyclical downturn, and there must be a policy response if things are going to get better.”
Little wonder the European public is losing confidence in the region, as the results of a poll by the Pew research organization showed Monday.
The 17-nation euro zone economy contracted 0.2 percent in the first quarter from the last three months of 2012, Eurostat reported Wednesday. That was less than the 0.6 percent decline recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent fall.
France’s slip into recession was the result of a second consecutive quarterly contraction of 0.2 percent. (At least two consecutive quarters of a shrinking economy is the widely accepted definition of recession.) Germany essentially marked time, with growth of 0.1 percent. The economy of the overall Union, made up of 27 nations, shrank 0.1 percent.
Eurostat said it was the first time the euro zone had contracted for six straight quarters since the creation of the single currency in 1999.
In annualized terms, the euro zone economy contracted about 0.8 percent in the first quarter. That is in stark contrast to the current2.5 percent annual growth rate in the world’s largest economy, the United States. China, with the second-biggest economy, reported in April first-quarter growth of 7.7 percent.
Japan, with the third-largest economy, is expected to post annualized growth of about 2.8 percent when it reports its first-quarter numbers on Thursday.
Europe’s economic doldrums are by no means the region’s problem alone. Despite its troubles, the Union remains the world’s single largest market, which means its weakness is retarding growth in the rest of the world.
Moody’s Investors Service warned in a report Wednesday that the weakness in the euro zone, combined with the mandatory budget cuts in the United States, would weigh on the world economy. Those factors will help limit growth in the Group of 20 industrial nations to just 1.2 percent this year, Moody’s said.
Article source: http://www.nytimes.com/2013/05/16/business/global/germany-france-economic-data.html?partner=rss&emc=rss
Speak Your Mind
You must be logged in to post a comment.