Finance Commissioner cautious as longest recession ends


The eurozone has exited its record 18 months of economic contraction as Eurostat GDP flash estimates recorded better than expected 0.3% growth in the currency area and in the wider European Union today (14 August).

Germany and France, expanding 0.7% and 0.5% respectively, exceeded the US growth figure of 0.4% recorded over the same quarter, and Portugal – one of three eurozone states to receive a multi-billion-euro bailout – showed the fastest growth, at 1.1%.

But in a mixed picture Spain, which needed support for its banking sector, saw its economic output fall by 0.1% on the quarter, and Italy and the Netherlands both saw output drop by 0.2%.

In eastern Europe, headline numbers showed the Czechs moving out of recession – in line with expectations – with growth of 0.7% compared with the first quarter;  Hungary grew 0.1% and Poland 0.4%.

Finnish sangfroid

"Today's figures, when combined with other recent positive survey data are encouraging and suggest the European economy is gradually gaining momentum,” Commission Vice-President Olli Rehn, responsible for economic and monetary affairs said in a written statement.

Rehn added that the figures reflected the Commission’s spring forecast for “a subdued, mild recovery in the second half of 2013”, and justified the fundamentals of the EU executive’s crisis response.

He cautioned against complacency, adding: “Self-congratulatory statements suggesting "the crisis is over" are not for today.”

The Finnish Commissioner said that all countries under programmes were fulfilling their obligations “with determination, often with painful efforts from their citizens, and with the unwavering solidarity of their European partners.”

Structural changes remain an issue

The news will be especially welcomed in Germany, where Chancellor Angela Merkel – facing an election in September – has come under some pressure for her handling of the financial crisis.

Merkel’s finance spokesman, Michael Fuchs, said Germany now had a great chance to be a "locomotive" that led European growth.

However, the need to complete structural reforms in the eurozone was earmarked as a priority in an accompanying note to the Eurostat figures released by Capital Economics.

"The return to modest rates of economic growth in the eurozone as a whole won't address the deep-seated economic and fiscal problems of the peripheral countries," researchers at Capital Economics wrote in the note.

Most of the Commissioners are still in holidays, but several were active on tweeter. Internal Market and services Commissioner Michel Barnier tweeted in his native French that figures confirmed that Europe was on the right track, but "a long way" was still lying ahead.

Employment and Social Affairs Commissioner László Andor tweeted that Europe needed further progress in reforming the monetary union, and a more pro-active employment policy.

Stagnant eurozone economies and growing unemployment rates across the EU have turned economic growth into a paramount need for Europe.

Under pressure from Germany, EU leaders have so far focussed their efforts on getting their accounts in order, committing to Draconian austerity plans and signing new treaties and adjustment plans mostly decided in Berlin.

At a June 2012 summit, EU heads of state agreed a "European Growth Pact" worth €120 billion, stressing the importance of restoring economic growth in Europe.

Autumn 2013: Third quarter figures from eurostat should indicate strength of return to growth

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