Slight Economic Improvement in the Euro Zone

Written by | Monday, November 17th, 2014

The latest official data have revealed that the euro zone’s two biggest economies – Germany and France – have escaped a new recession in the third quarter of 2014. In Germany, gross domestic product (GDP) grew only by 0.1 percent from July to September after shrinking in the previous three months. In France, the economy grew about 0.3 percent in the third quarter after it had contracted by 0.1 in the previous quarter. Since recession is defined as a fall in GDP for two consecutive quarters, both Germany and France have technically avoided a new recession.

The common currency area grew overall only about 0.2 percent, which is a slight increase when compared to the previous quarter. The Eurostat, Europe’s main statistical office generally reported an improvement but it was not sufficient enough to dispel concerns about Europe’s economic health. This includes mainly problems with low inflation and stalled reforms. According to Howard Archer of HIS Global Insight, “the euro zone is having an almighty struggle to develop even modest growth momentum”. He added that “heightened geopolitical tensions, particularly related to Russia and Ukraine, had weighed down on confidence and investment across the euro zone, reinforcing ongoing challenging conditions in many countries”.

Overall, the economic prospects for the euro zone economies remain mixed. Although the end of recession was successfully confirmed in Greece, as the country grew by 0.7 percent in the third quarter, data was still unavailable for Ireland and Portugal failed to meet expectations with only about 0.2 percent growth even after the country’s quite serious reform efforts. Cyprus, which is to receive bailout from the EU and the International Monetary Fund, has continued to contract by 0.4 percent. Brussels commented though that “the recovery was on track but still too slow and fragile”.

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