The Eurozone is now in recession – this, at least, is what is implied by today’s avalanche of dire economic data. Eurostat has not (yet) made this calculation; but Capital Economics has. Take into account the relative size of the Eurozone economies who have declared figures and it suggests a fall of 0.1 per cent for Q3 which, which, coming after the contraction of 0.2 per cent in Q2, would meet the test for recession (two consecutive quarters of negative growth). So, like Britain, a double-dip recession.
Greece and Portugal are still in meltdown. The Germans are doing okay, with growth of 0.2 per cent for Q3. This is mainly because of the fact that their currency would be worth about a third more if they had the Deutschmark. The Euro crisis is making German exporters that much more competitive. This is why the Germans tolerate the bailouts: they know that, if the Eurozone was not so weak, their wares would cost a hell of a lot more to foreigners. So Germany is, in a very meaningful way, benefitting from this crisis.
Capital Economics says that the Eurozone’s GDP might fall by about 0.7 per cent for this year and, far worse, contract by another 2.5 per cent the year after. Making debt cheaper does not make problems go away. It just makes them easier to cover up: for a while. After Sir Mervyn King’s dire prognosis yesterday, Britain looks like it is midway through a Japanese-style ‘lost decade’; but the Eurozone may have longer to spend in this economic purgatory.
UPDATE Eurostat have now confirmed (pdf) that the Eurozone is in recession. But as with so many of the big stories, Coffee Housers were able to read it here first.