With governments trapped in austerity, banks refusing to lend and leaders resorting to urgent bids to unlock tax hidden in offshore bank vaults, the eurozone is now firmly entrenched as the global economy's "weakest link," according to Dutch-based ING analysts.
One week from another tense summit of EU leaders, official figures showed a 0.2 percent contraction between January and March, in the longest recession since the single currency bloc was established in 1999.
On a year-by-year comparison, data agency Eurostat said this translated into a 1.0 percent drop in output across the 17 states that share the euro—which are home to 340 million people.
While core economy Germany clambered out of negative territory with 0.1-percent growth after a 0.7-percent slide at the end of 2012, France sank into recession with a 0.2-percent reduction and both Italy and Spain posted 0.5-percent drops, the figures showed.
"We doubt that the region is about to embark on a sustained recovery any time soon," said Ben May of London-based Capital Economics, citing disappointing survey results in recent weeks.
The latest official European Commission forecast for 2013 published earlier this month tipped a 0.4-percent contraction, but the analyst said that was way off course with "something closer to a two-percent decline" likely.
His firm's pessimism was backed by Howard Archer of fellow London-based specialist analysts, IHS Global Insight.
"We expect the eurozone to suffer gross domestic product (GDP) contraction of 0.7 percent in 2013 with very gradual recovery only starting in the latter months of the year," said Archer.
"Today's GDP figures once again show that the eurozone remains the weakest link in the world economy," said the ING analyst, Peter Vanden Houte, though "a subdued recovery in the second half of the year is still possible."
But for that to happen, it would be "imperative that eurozone leaders maintain the momentum in the strengthening of the monetary union, with the banking union as a first important hurdle to be taken."
He tipped action by the European Central Bank to boost lending to small businesses.
No figures were given for growth in Ireland which, among the bailout economies, appeared to have turned the corner in the previous quarter with flat instead of negative growth.
However, Cyprus, at negative 1.3 percent, can expect a sharp deterioration later, given that the figure was for the period prior to bailout negotiations that saw banks in lockdown for a fortnight. — Agence France-Presse
source: gmanetwork.com
