CEPR Queries Eurozone’s Emergence from Recession

A widely-held assumption that the prolonged recession in much of the eurozone began lifting last summer as output moved back into growth may have been premature, according to the Centre for Economic Policy Research (CEPR).

Economists for the London-based think tank, which draws on academic research across Europe, said that eurozone growth is still too weak and unemployment too high to declare the recession over. At best, they said, the recession that began in 2011 is merely in hibernation.

Recessions are generally considered to be over once two quarters of positive growth have been achieved in succession. The eurozone reported annualised growth of 0.5% in the third quarter of 2013 after growth of 1.3 percent in Q2.

However, the non-profit CEPR does not accept that definition and believes that economists and policymakers should look more broadly at other indicators, such as the sustainability of growth and unemployment. The eurozone jobless rate of 11.7% remains close to record levels.

“Since early 2013 the euro area has witnessed a prolonged episode of extremely weak growth in economic activity,” a committee of the group stated. “Labour markets have shown little change over that period.”

The eurozone economy grew at an annual rate of 0.7% in Q114. Earlier this month the European Central Bank (ECB) forecast that the region would grow 1% this year, 1.7% in 2015 and 1.8% in 2016.

However, the Q1 figure disguised mixed fortunes across the region as economic output contracted in eight eurozone countries over the period, including the Netherlands and Finland. Growth was flat in France, which has the second-largest economy in the eurozone after Germany.

Business confidence has also declined among companies that transact with Russia because of the crisis in Ukraine, according to a survey by the Ifo Institute in Munich.

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