In a series of statistical shocks that raise doubts about Europe’s economic recovery, the region’s consumer spending, GDP and exports all dropped in the first quarter at an alarming rate, according to EU’s statistics office (Eurostat). GDP fell by 2.5% in the euro zone and by 2.4% in total EU during the first quarter of 2009, compared with the previous quarter. In the fourth quarter of 2008, growth rates were -1.8% in eurozone and -1.7% in all EU. During the first quarter of 2009, household final consumption expenditure declined by 0.5% in eurozone and by 1.0% in all EU (after falling by -0.4% and -0.6% respectively in the previous quarter). Overall these figures paint a grim economic picture. Earlier this year Jean-Claude Juncker, the Eurogroup Chief, has warned that job losses will escalate this year despite measures taken by EU leaders in recent months to boost the economy. Euro-area unemployment is at a 10-year high of 9.2%, according to the latest official figures.
The crisis has severely affected Central European countries a region that has been experiencing a fast paced growth. One shouldn’t however look the region as a whole as there are differences between countries and every country is faring differently through the crisis. IMF and the EU have come to support Hungary that was facing problems in late 2008. Elsewhere Standard & Poor’s downgraded the long-term rating of Ireland, Spain and Greece expressing concerns over the state of their economies and the financial sector. Prior to the current downturn, the Irish economy had not experienced a recession since 1983 and enjoyed double-digit growth in the 1990s. In another development that shocked markets, the UK Treasury failed in March 2009 to sell all its government bonds in an auction, for the first time since 2002.
Related articles: Eurostat portal, Eurostat NewsRelease, 3 June 2009, European Spending, Exports Decline Most in 14 Years Bloomberg Update, Eurogroup chief predicts huge layoffs, euobserver 16.04.2009 , IMF, EU agree Hungary rescue-but will it work? Reuters Oct 29, 2008, Greece’s Sovereign Credit Rating Cut to A- by S&P, Bloomberg Jan. 14, 2009, Spain Downgraded by S&P as Slump Swells Budget Gap, Bloomberg Jan. 19, 2009, Ireland credit rating cut for the second time Times OnLine June 8, 2009, UK government bond auction fails, BBC, 25 March 2009, Record unemployment in eurozone crushes hopes of fast recovery, Forbes/Reuters (15 June, 2009)