Greece Posts Fastest Growth Rate in Currency Bloc
The eurozone economy expanded last quarter at a sluggish pace, underscoring concerns that the region is stuck in a rut of declining investment and high unemployment at a time when other large economies such as the U.S. and U.K. are seeing more vigorous and jobs-rich recoveries.
In a reversal of recent trends, it was countries hit hardest by the bloc’s debt crisis that led the pack. Greece’s economy posted the fastest growth rate in the eurozone, and Spain recorded solid expansion, too.
But these countries aren’t big enough to drive the entire €9.5 trillion ($11.85 trillion) eurozone economy forward. The region’s dominant economies—Germany and France—emerged from second-quarter contractions with only weak growth. Italy’s economy shrank.
Gross domestic product in the 18-member eurozone grew 0.6% last quarter on an annualized basis, the European Union’s statistics office, Eurostat, said Friday. GDP grew 0.2% on a quarterly basis. The figures were slightly better than expected, but still left GDP about 2% below its precrisis peak in 2008.
“Growth is still nowhere near strong enough to eat into the vast amount of spare capacity in the region and hence diminish the risks of a prolonged and damaging bout of deflation,” said Jonathan Loynes, an economist at consultancy Capital Economics, in a research note. Deflation refers to persistent declines in consumer prices that damage spending and investment and make it harder to service debts.
Annual eurozone inflation was 0.4% last month, Eurostat said Friday, confirming an earlier estimate. That is well below the European Central Bank’s target of just below 2%.
The GDP figures highlight a challenge facing policy makers. The bloc’s debt crisis from 2010 to 2012 was largely resolved following the ECB’s commitment in 2012 to purchase government bonds if needed to prevent a run on a eurozone member state’s bond market. The program, which hasn’t been used, led to a steep drop in Spanish and Italian bond yields.
But the eurozone now faces a deeper problem that is harder to solve: It isn’t growing nearly fast enough to create jobs and help businesses and governments reduce debt. And whereas weakness was previously concentrated in Spain, Ireland and other countries that suffered the most severe aftershocks of the debt crisis, it is now healthier economies such as Germany and Austria that face stagnation.