Eurozone Recovery Stalls in Q2

The economies of the eurozone, which recorded modest growth in gross domestic product of 0.2% in the first quarter of 2014, recorded zero growth in Q2 according to Eurostat, the European Commission’s (EC) statistics bureau.

The poor performance reflected weaknesses in the region’s key economies. Germany, which provides more than a quarter of the eurozone’s output, shrank by 0.2% between April and June – its first contraction since the end of 2012. The reversal, after 0.7% growth in Q1, was attributed to lack of investment, a
sharp drop in business confidence
in the wake of the Ukraine crisis and the European Union’s (EU) imposition of economic sanctions against Russia.

The French economy recorded no growth in Q2 while Italy, the eurozone’s third-largest economy, has already revealed that it fell back into recession during the quarter – its third since 2008.

However, Portugal recovered from a 0.6% contraction in Q1 to achieve growth of 0.6% expansion Q2, while Spain maintained its recovery by also recording 0.6% growth. The Netherlands also returned to growth after a contraction in Q1 and managed 0.5% over the quarter.

Eurostat also confirmed that the region’s inflation rate fell to 0.4% per cent in July, its lowest since early 2010 and less than a quarter of the European Central Bank’s (ECB) target of below but close to 2%. Last week, ECB president Mario Draghi described Europe’s recovery as “weak, fragile and uneven”.

The eurozone, which has managed only 0.7% growth in output over the past year, has lagged both the UK, which achieved 3.1% and the US, which expanded by 2.4% despite the setback of a harsh winter.

The US and UK have now surpassed their pre-crisis peaks, but the eurozone’s economy remains smaller than before the collapse of Lehman Brothers in September 2008.

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