Europe emerges from the recession

After five consecutive quarters of recession, the euro zone recorded a rise in its GDP of 0.4% in the 3rd quarter compared to the preceding three months according to preliminary estimates by Eurostat. The European Union as a whole is back on the road to growth. The overall GDP of the 27 countries increased by 0.2% in the third quarter.
With 0.7% growth in its GDP in the third quarter, Germany is once again playing
its role as the motor of the euro zone, overtaking the economic performances of its French neighbour. The German economy has benefited from healthy exports, a rise in investments in the building and machine tool sectors and the reconstitution of stocks. On the other hand, the leading economy of the euro zone has not overcome its weak point: sluggish consumption.
For its part, France recorded growth of 0.3% for the same period although INSEE, the national statistics institute, predicted a rise in GDP of 0.5%. By way of proof that the recession page has been turned: job shedding has almost stopped, according to the French Minister for the Economy, Christine Lagarde. Although household consumption held up over this period, investment, especially by households, continued to shrink, reported the National Statistics Institute. Domestic demand has caused the GDP to fall by 0.1 point. Foreign trade, stimulated by exports (manufactured goods, automobiles, etc.), has saved French growth, contributing 0.4 points of GDP.

The Italian economy starts up again
The Italian economy has started up again, with GDP rising by 0.6% after five consecutive falls, including a drop of –5.9% in the second quarter of 2009 alone. Over the year, the GDP has regressed by 4.6% and growth for 2009 stands at – 4.8%, i.e. the scenario adopted by the Government in its Budget Plan for 2010. “This is an important signal, a significant figure that indicates that the Italian economy is on the mend,” declared in mid-November Claudio Scajola, Italian Minister responsible for economic development. “We must now keep a close eye on public finances”, he added. For its part, the Bank of Italy is concerned by the level of public debt which increased by 7.4% in September compared to the end of 2008.
Lithuania has also performed very well, progressing from a contraction of – 7.7%
in the second quarter to growth of 6% in the third. Portugal and Austria have both recorded an increase of 0.9% in the third quarter. The Netherlands are also getting their heads above water with growth of 0.4%, as is Belgium with 0.5%. The Czech Republic and Slovakia are recording growth of their GDP by 0.8% and 1.6% respectively for the second consecutive quarter.
However, all the European countries are not in the same boat. With a contraction
of 0.4% in its GDP, the United Kingdom is not yet back on the road to growth. The Hungarian economy has also announced a fall of 1.8% in its GDP in the third quarter, with the country enduring its sixth consecutive quarter of decline. Spain and Romania are still in recession whilst Cyprus has recorded a drop of 1.4% in the third quarter. For its part, Greece has just entered into recession for the first time in sixteen years. Although the country’s GDP had hitherto been increasing, it fell again by 0.3% in the third quarter.

Brussels predicts slow and gradual recovery
Although certain European countries might curb the speed of its recovery, the euro
zone is now turning its back on the worst economic crisis for sixty years. Admittedly, the United States has already overtaken Europe with growth in its GDP of 0.9% and results in the third quarter remain inferior to the predictions of the economists (who were expecting 0.5% growth in GDP in the euro zone), but we must nonetheless remain positive. “Europe is performing better than expected,” affirmed the IMF’s Chief Economist, Olivier Blanchard. “It would seem that the next quarters will be better than we thought a few months ago.”
However, European growth is not expected to recover its pre-crisis rhythm before the end of 2011. The reason for this is a disappointing level of investment, with the banks continuing to restrict credit to companies and household consumption bled dry, whilst unemployment stands at more than 10% of the working population.
Brussels predicts slow and gradual re-covery The European Commission is counting on a fall of 4% in the GDP of the euro zone over the year as a whole, then on growth of 0.7% in 2010 and 1.5% in 2011. “We think  recovery will gather strength in 2010 and continue into 2011,” declared Joaquin Almunia, the European Commissioner responsible for economic and monetary affairs.
The third quarter improvements are in particular the result of recovery measures whose effects could wane in 2010. “After a preliminary phase of recovery, growth
of the GDP in the Union and the euro zone is expected to decline a little before gaining ground again in the second half of 2010 and after,” explained Jaoquin Almunia. Many fears persist. “Credit has not improved,” he points out. “Credit flows are almost zero, even negative in certain cases. Yet if credit does not recover there will be no lasting recovery for the European economy.”
The European Commissioner is also worried about increased public deficit in the euro zone countries which is expected to triple this year, reaching 6.4% of the GDP as against 2% in 2008. Finally, the rise in unemployment remains a worry. “The improvement in the GDP in 2010 will not be felt immediately in terms of employment,” warned Joaquin Almunia. Unemployment will continue to increase in 2010, and also in 2011 but less aggressively. The employment market is not expected to stabilise before the end of 2010 or the year 2011 once recovery is confirmed.