Europe: Eurozone emerges from recession

European Commissioner for Economic and Monetary Affairs Olli Rehn addressing the media at the Europe

European Commissioner for Economic and Monetary Affairs Olli Rehn addressing the media at the European Commission headquarters in Brussels in May, when the European Union predicted that the recession in the Eurozone will continue in 2013 and that unemployment will stand at record levels. - Credit: AP

The eurozone has finally emerged from its prolonged recession as figures show it grew by 0.3% in the second quarter.

It is the first time that output in the single currency bloc has increased since late 2011.

The end of the recession, which lasted for six straight quarters, may mark a key moment for economies throughout the world as they seek to emerge from downturns.

In Britain, the fragile recovery has been dogged by fears over the impact of turbulence in the eurozone, its biggest trading partner.

The 0.3% growth across the 17 countries of the single currency area compared to the last quarter, announced by the European Union’s Eurostat office, was slightly ahead of expectations of 0.2%.

It was largely driven by Germany, Europe’s biggest economy, gaining steam with a 0.7% increase in output after a flat start to the year.

Meanwhile, France is officially out of recession after posting 0.5% growth.

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There were also encouraging signs elsewhere, notably from Portugal, which grew 1.1% while there were even signs that Greece’s deterioration is starting to tail off.

Figures for quarter-on-quarter growth for the country were not available but its decline compared to last year, of 4.6%, was an improvement on the 5.6% fall recorded in the last quarter.

Quarter-on-quarter declines of 0.1% and 0.2% in Spain and Italy were better than at the start of the year though they continued to be in recession.

Europe’s improvement eases fears that the UK could be dragged down by international financial chaos.

Britain has enjoyed two successive quarters of growth this year, with the latest three-month spell seeing gross domestic product climb by 0.6% and forecasts of a similar rise in the current period.

But the Bank of England has warned that the recovery remains weak by historical standards and the potential of storms from the continent have been seen as one of the key threats to a sustained upturn.

Recent months have seen a brightening picture in Europe as governments shift their focus away from debt reduction.

Industrial production is rising while consumer spending has stabilised and exports have increased as key trade partners including the US and Japan strengthen.

But Peter Vanden Houte of ING Bank said there was “no reason to get overexcited” by today’s figures.

He said some of the improvement in northern countries of the eurozone was due to a catch-up effect in the construction sector after the harsh winter weather in the first quarter of the year.

But confidence, though fragile, was improving.

Howard Archer of IHS Global Insight said: “A recent more stable and settled environment in the eurozone has helped consumer and business confidence to improve, and this seems to be now gradually feeding through to provide limited support to real economic activity.”