December 8, 2023

Off the Charts: In Europe, Even the German Powerhouse Is Losing Steam

In the second and third quarters of this year combined, Germany grew at an annual pace of just 1.6 percent. France, the second-largest economy in the euro zone, showed an annual rate of just 0.6 percent over the same six months.

Until recently, the euro zone seemed to be separated into three groups when it came to economic growth. Germany, and a few other Northern European countries, were doing the best, while economies in the peripheral countries were shrinking. In between were countries with moderate rates of growth.

But now it appears the in-between group is faltering, while the peripheral countries continue to struggle. In the third quarter, according to Eurostat, the European statistical agency, Belgium, which had been among the better performers, showed no growth at all. The same was true for Spain, and the Netherlands reported its real gross domestic product declined for the first time since 2009.

The accompanying charts show the change in gross domestic product figures for nine euro countries since the second quarter of 2009, as well as figures for the three largest industrial countries outside the bloc. Germany’s economy is 7.6 percent larger than it was at the bottom, a growth rate more than twice that of France. There is as yet no third quarter estimate for Italy, but its growth rate was tepid even before its borrowing costs began to rise.

One of the few relative bright spots is Ireland, whose economy appears to be finally growing after years of austerity and deflation. But there is no sign of recovery in Portugal, and the Greek economy continues to decline. Greece is not shown in the chart because it is currently unable to produce seasonally adjusted statistics. But Eurostat estimates that the Greek economy was 5.2 percent smaller in the third quarter than it had been a year earlier.

In the early months of recovery, Germany may have benefited from its neighbors’ weaknesses. Its companies were better positioned to export, both within Europe and outside it, thanks in part to Germany’s having held down the growth in labor costs. The euro was also weaker than an independent German mark would have been, providing more help for German exports.

But now it appears that the weakness of its trading partners may be slowing Germany’s economy, at the same time that borrowing costs are rising for those countries. A survey of German analysts this week showed investor expectations for the economy had fallen to the lowest levels since 2008.

The United States economy has grown 5.6 percent from the bottom, for an overall rate of 2.5 percent a year. That may seem good when compared with other countries, but by historical measures it is the weakest recovery since World War II. The economy grew 6.3 percent — a 2.7 percent annual rate — over the nine quarters following the 2001 economic bottom, in what had been the slowest pace until now.

Floyd Norris writes about finance and the economy at

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