Fears that the eurozone financial crisis could tip the continental economies into a "double dip" recession mounted yesterday with the publication of weak estimates for growth in the single currency area.
As the UK's largest trading partner, and with the complex and intimate relationships between British and European banks, such signs of fragility in the rest of Europe also have dire implications for the British economy's hopes of recovery. The combined economies of the 16 eurozone nations grew by only 0.2 per cent in the first quarter of this year, according to the EU's statistical service, Eurostat. This was a modest improvement on the 0.1 per cent figure previously estimated and the same expansion recorded in the last three month s of 2009.
The data suggest output will not return to pre-crisis levels for some years. The figures showed that the sovereign debt crisis in Greece, fears of "contagion" to other states such as Portugal and Spain, and general turmoil in the markets had dented consumer confidence and spending. With public spending cuts being implemented from Dublin to Athens, the prospects for an acceleration seems increasingly slim.
Most eurozone economies saw minimal growth, including Germany (0.2 per cent), France (0.1 per cent) and the Netherlands (0.2 per cent). Spain's growth was a mere 0.1 per cent, but it did signal a formal end to recession.
The fastest growth was in Italy, at 0.5 per cent, though mostly down to statistical corrections. Greece, in a taste of worse to come, endured a severe contraction of 0.8 per cent. By comparison, the UK grew by 0.3 per cent during the first quarter of the year.
The slide in the euro and renewed demand from China for capital goods may help exporters, especially in Germany. Eurozone exports rose by 2.5 on the previous quarter.
However, economists warned worse might still be to come. "The eurozone still faces significant obstacles to robust growth, and we suspect that growth will moderate anew in the second half of the year after the likely spike up in the second quarter," said Howard Archer, of Global Insight.
"We suspect the upside for consumer spending will remain limited for some time to come. Consumers are currently facing a near 12-year high unemployment rate of 10.1 per cent."Reuse content