France, Greece help lift eurozone growth
LONDON - Fears that the 18-country eurozone could be heading back into recession eased Friday with the news that it grew faster than expected in the third quarter, thanks to a better performance by France and confirmation Greece has come out of one of the developed world's deepest recessions in living memory.
The Eurostat statistics agency said the eurozone grew 0.2 percent in the July to September period from the previous quarter, which is equivalent to an annualized rate of around 0.8 percent. The growth is relatively weak, but stronger than the 0.1 percent tick recorded in the second quarter, which most in the markets had expected to be repeated.
The overall figures did little to suggest the eurozone might reach U.S.-levels of growth anytime soon.
"After a false dawn when the eurozone exited recession just over a year ago the fundamentals and overall economic picture have failed to see a substantial improvement," said Danae Kyriakopoulou, an economist at the Centre for Economic and Business Research.
The eurozone recovery has faced headwinds for years, notably the debt problems afflicting many of the countries that use the euro. The European Central Bank is under pressure to help out more, especially as inflation is low -- at only 0.4 percent in the year to October, it is far below the 2 percent rate the ECB looks for.
If prices start falling on a sustained basis -- so-called deflation -- growth may be choked further as consumers delay purchases in the hope of cheaper bargains down the line and businesses fail to innovate and invest.
"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 deflation," said Jonathan Loynes, chief European economist at Capital Economics. "As such, the numbers do nothing to ease the pressure on the ECB and governments to provide more policy stimulus."
A more detailed look at Friday's figures shows much of the growth was due to France expanding 0.3 percent during the quarter. Many had feared Europe's second-biggest economy could sink back into recession. France's outperformance helped to make up for a muted 0.1 percent gain in Germany, Europe's biggest economy, and a 0.1 percent contraction in Italy.
In perhaps the most momentous development, the figures showed Greece is out of recession for the first time in six years. Greece posted annual growth of 0.4 percent in the second quarter, followed by 1.4 percent in the third. According to Eurostat, Greece slipped into recession in the summer of 2008.
Greece is now among the fastest-growing economies in the eurozone, having expanded in each period this year. In the third quarter, its output swelled by 0.7 percent quarter-on-quarter.
However, it's going to take years for Greece to recoup the economic ground lost during the recession. Its economy is now around a quarter smaller than when the recession started.
No economy in the world was immune from the fallout of the global financial crisis of 2008-9, but few were in as bad a state to deal with it as Greece. Years of profligate government spending had combined with a super-charged credit boom to give the illusion that Greece had won its place among the developed world elite.
The collapse of Lehman Brothers in September 2008 and the ensuing global recession -- the deepest since World War II -- tore that impression asunder. The Greek economic miracle that had allowed it to join the first wave of countries in the European Union to use euro notes and coins at the start of 2002 was exposed for what it was -- a mirage.
Over the next few years, the Greek economy would hurtle from one crisis to another. Its international bailouts and the associated austerity prescribed by its creditors from Europe and the International Monetary Fund garnered global attention as investors bet on whether it would drop out of the euro bloc.