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Growth Numbers Don't Dispel EU Ennui, Need for Reform


The Eurozone got a bit of unexpected good news, as the 17-country area pulled itself out of recession and grew 0.3 percent in the past quarter. While the Wall Street Journal was quick to note that “a resolution to its banking and fiscal crises remains a distant prospect”, the numbers were a welcome reprieve from an otherwise grim outlook.

Growth in Germany, the EU’s economic engine, powered the recovery. But Europe’s other heavyweight, France, also turned in surprisingly strong numbers. The French economy grew 0.5 percent—more than the United States. Perhaps the best news came from the Iberian Peninsula, where crisis-hit Portugal posted the best growth numbers of any Eurozone country. Spain, meanwhile, appeared to slow its free fall, shrinking just 0.1 percent. While sustainable growth may not be on the horizon for the Spanish, holding the line is good news for a country rocked by record unemployment. Financial markets weren’t blown away by the news, but European stocks were up modestly as investors showed signs of tentative optimism.

The news wasn’t all rosy, though. The Netherlands remains stuck in recession, and the Cypriot economy continues to decline. Greek GDP is on track of lose half its value by the end of the year. Overall, as the WSJ notes,

The return to growth in the currency area should deliver a much-needed boost to household and business confidence, but the recovery is unlikely to be anything but modest. Unemployment rates remain at record highs, bank lending to businesses is continuing to fall, and governments continue to cut spending in an effort to bring their rising debts under control. And without strong growth, it will be difficult for the euro zone to bring its fiscal and banking problems to an end.

While a modest improvement in economic outlook may well relieve some of the pressure on EU politicians, particularly in the south, the continent still faces serious challenges. The Euro was a seriously flawed concept to begin with and remains largely unworkable without major changes. If minor upticks in growth enable the Eurozone’s leaders to continue kicking the can down the road on reform, then today’s good news will end up being no good news at all.

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  • Pete

    Do you think the Gross Domestic Product numbers for Europe are believable?

    America’s aren’t. Here, our GDP is overstated while our unemployment & inflation numbers are widely known to be are understated.

    But hey, the ruling elite has to do what it has to do to stay on top.

  • Jacksonian_Libertarian

    “Greek GDP is on track of lose half its value by the end of the year.”

    This is the only good news, as the Greeks are the only ones being forced to cut Government Spending. Pitiful growth numbers, massive unemployment, tax increases, austerity programs that are nothing of the sort, the Europeans are learning the hard lessons of Big Government. When a parasitic infestation reaches a certain size, it kills its host. According to the Rahn Curve

    a nation’s economic growth is maximized when the burden/spending of Government is between 15%-25% of GDP. European Government Spending has grown so large, growth is nearly impossible.

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