Europe is still trying to crawl back to where it was in 2008.
That was the subtext of the economic data for the eurozone published on Friday.
The 19-country eurozone, the core of Europe’s economy, grew at an annual rate of 1.1 percent in the last quarter of 2015. But total economic output remained just slightly lower than when the global economic crisis began, in 2008.
Since then, much of the rest of the world, including the United States, has bounced back, however fitfully. But the eurozone as a bloc has been weighed down by huge numbers of problem loans held by its banks, a shortage of credit and a reluctance of governments to make politically unpopular economic changes. More recently, an influx of immigrants has heightened political tensions and further shaken the eurozone’s unity.
And yet many of the eurozone’s problems are a result of policy missteps — or policies that simply could not be executed because of the fragmented nature of a loose affiliation of 19 countries that share a currency but each have their own taxing and spending regimes.
After the financial crisis, the centralized United States economy took only until the third quarter of 2011 to surpass its previous peak at the end of 2007. That was largely because the federal government quickly stepped in to clean up the commercial banks. And the central bank — the Federal Reserve — kept interest rates low and embarked on an unprecedented program of huge stimulus spending to revive the American economy.
Many eurozone governments, however, responded to the crisis by cutting spending, engaging in austerity economics that thwarted growth.
Along the way, the European Central Bank, under its previous president, actually raised interest rates before reversing course. Even under its current president, Mario Draghi, who came to power in late 2011, the central bank was unable to mount a stimulus program comparable to the Fed’s until March of last year — as the members of the bank’s Governing Council, coming from various eurozone countries, argued over when or whether to take action.
A Struggle to Recover
The economic output of the eurozone has yet to return to its precrisis peak of 2008. After an initial recovery similar to that in the United States, the European economy has faltered, and the unemployment rate has remained stubbornly high.
All of this has added up to growth so feeble that the eurozone economy is still not as big as it was five and a half years ago. And unemployment is a stubbornly high 10.4 percent — more than twice the jobless rate of the United States.
Europe’s failure to climb back provides one more reason to be nervous about the global economy. The eurozone is still not strong enough to compensate for problems elsewhere, like in China, where there is the risk of a slowdown. The longer it takes for Europe — the United States’ largest trading partner — to make up lost ground, the greater the risk the region will be trapped in the same kind of long-term stagnation that afflicts Japan.
Adjusting for inflation, the countries sharing the euro currency produced goods and services valued at 2.465 trillion euros, or $2.788 trillion, in the last three months of 2015. That brought the eurozone close to — but still short of — the €2.471 trillion that it produced in the first quarter of 2008.
A demonstration in Athens against pension cuts last month. Greece’s economy is three
(picture) quarters as large as it was before the beginning of the crisis.
Sources nytimes.com
