In Europe, even powerhouse losing steam

In Europe, even a powerhouse is losing steam

11:33 PM, 21st November 2011
In Europe, even a powerhouse is losing steam
Germany the powerhouse of Europe.


NEW YORK, US: Since the world economy hit bottom in early 2009, Germany has been the engine of growth in Europe. But new figures released this week indicated that the German economy was growing at its slowest rate since the recovery began and that much of Europe was no longer growing at all.

In the second and third quarters of this year combined, Germany grew at an annual pace of just 1.6 per cent. France, the second-largest economy, showed an annual rate of just 0.6 per cent over same six months.

Until recently, eurozone seemed to be separated into three groups when it came to economic growth. Germany and a few other Northern European countries were doing the best, while economies in the peripheral countries were shrinking. In between were countries with moderate rates of growth.

But now it appears the in-between group is faltering, while the peripheral countries continue to struggle. In the third quarter, according to the European statistical agency Eurostat, Belgium, which had been among the better performers, showed no growth at all. The same was true for Spain, and the Netherlands reported that its real gross domestic product declined for the first time since 2009.

One of the few relative bright spots is Ireland, whose economy appears to be finally growing after years of austerity and deflation. But there is no sign of recovery in Portugal and the Greek economy continues to decline. Eurostat estimates that the Greek economy was 5.2 per cent smaller in the third quarter than it had been a year earlier.

In the early months of recovery, Germany may have benefited from its neighbours’ weaknesses. Its companies were better positioned to export, both within Europe and outside it, thanks in part to Germany’s having held down growth in labour costs. The euro was also weaker providing more help for German exports.

But now it appears that the weakness of its trading partners may be slowing Germany’s economy, at the same time that borrowing costs are rising for those countries. A survey of German analysts this week showed investor expectations for the economy had fallen to the lowest levels since 2008.

(C) New York Times News




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