Recession now eurozone's longest

2013-05-16T00:00:00Z Recession now eurozone's longestThe Associated Press The Associated Press
May 16, 2013 12:00 am  • 

PARIS - The eurozone is now in its longest recession ever - a stubborn slump that has surpassed even the calamity that hit the region in the financial crisis of 2008-2009.

The European Union statistics office said Wednesday that nine of the 17 EU countries that use the euro are in recession, with France a notable addition to the list. Overall, the eurozone's economy contracted for the sixth straight quarter, shrinking by 0.2 percent in the January-March period from the previous three months.

Though the contraction is an improvement on the previous quarter's 0.6 percent decline, it's another unwelcome report for the single-currency bloc as it grapples with a debt crisis that has prompted governments to slash spending and raise taxes.

"The eurozone is facing a double blow from necessary restructuring of its domestic economy and somewhat disappointing growth in world trade, in particular demand from emerging markets," said Marie Diron, senior economic adviser to Ernst & Young.

This recession is not nearly as deep as the one in 2008-9, which ran for five quarters, but it is now the longest in the euro's 14-year history. A recession is typically defined as two straight quarters of negative growth.

Austerity has inflicted severe pain and produced social unrest across the eurozone, where the average jobless rate is a record 12.1 percent. In Spain, it's 26.7 percent, and in Greece, 27.2 percent.

Wednesday's report also brought bad news for the wider 27-country EU, which includes non-euro members such as Britain and Poland. The EU, too, is now in recession after shrinking by a quarterly rate of 0.1 percent in the first quarter, following a 0.5 percent drop in the previous period.

With a population of more than half a billion people, the EU is the world's largest export market. If it remains stuck in reverse, companies in the U.S. and Asia will be hit. Last month, U.S.-based Ford Motor Co. lost $462 million in Europe and called the outlook there "uncertain." McDonald's saw its sales in Europe, the hamburger chain's biggest market outside the U.S., fall 1.1 percent in the first quarter.

Other major economies have faltered this year, but none is in recession. The annualized contraction in the eurozone of around 0.9 percent, based on this quarter's figures, contrasts with the equivalent expansion of the U.S. of 2.5 percent. Meanwhile, China, the world's No. 2 economy, is growing around 8 percent a year.

For many analysts, that discrepancy highlights Europe's flawed economic approach since the end of the financial crisis. Instead of keeping the spending taps on - as the U.S. has largely done - the region concentrated on austerity though companies and consumers weren't able to plug the gap left by the retrenching state.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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