The latest Eurostat flash estimate shows that at least nine EU countries are in recession, having posted negative economic growth in both the first quarter of 2012 and the last of 2012. In four of these Member States that makes three consecutive quarters of contraction and in Greece and Portugal output has been falling for what seems like an eternity. Now Italy, too, seems to be in a vicious downward spiral as austerity measures bite, posting -0.8% for the first three months of this year, after -0.7% and -0.2% the previous two quarters. (Note: all figures are on a quarter-on-quarter basis, and are not annualised.)
I say “at least nine” because first quarter data are not yet available for seven countries, five of which (DK, IE, MT, SL and SE) had negative growth in the last three months of 2011 and so may well also be in recession. And on any sensible reading we must add Hungary which was stagnant for the last three quarters of 2011 and suffered a thumping 1.3% contraction in the first three months of this year.
Once all the data is in, we will see that as many as half of the 27 EU member states are in recession.
The euro area and EU27 as a whole only just missed a technical recession, with output unchanged in the first quarter following a 0.3% drop in the fourth quarter of last year. This was virtually solely due to the 0.5% growth achieved by Germany, which represents about 30% of the euro area.
Coming on top of the recent dramatic deepening of the political crisis in Greece and the election of Francois Hollande, and a purchasing manager index pointing to worsening near-term prospects (including for Germany), these figures only underline the urgent need for decisive measures to actively stimulate the European economy. Pious words and pseudo solutions (aka ‘structural’ reforms) will not do.