Europe on the edge of recession
Wednesday, August 15, 2012
LONDON (AP) — Europe is edging closer to recession, dragged down by the crippling debt problems of the 17 countries that use the euro, official figures showed Tuesday.
Eurostat, Europe’s statistics agency, revealed that the economies of both the eurozone and the European Union, which has 27 countries, shrank by a quarterly rate of 0.2 percent in the second quarter of the year. In the first quarter, output for both regions was flat. A recession is officially defined as two straight quarters of falling output.
Europe’s debt woes have been blamed for the sharp deterioration in the global economic outlook over the last few months. The region is the U.S.’s largest export customer and any fall-off in demand will hit order books — as well as President Barack Obama’s election prospects.
The 17-country eurozone is grappling with sky-high debt levels and record unemployment of 11.2 percent. Compared with the second quarter of last year, the eurozone’s economy is 0.4 percent smaller.
The region’s economy would have slipped into recession had it not been for better-than-expected GDP figures from its two leading economies, Germany and France. Germany, Europe’s biggest economy, posted quarterly growth of 0.3 percent, better than the 0.2 percent uptick forecast. France also beat expectations of a small contraction in its output to record no change in its economy for the second quarter.
The European Union, which has a population of 500 million people, recorded a GDP last year of $15.5 trillion — slightly more than the U.S.’s output. It is also a major source of sales for the world’s leading companies. Forty percent of McDonald’s global revenue comes from Europe - more than it generates in the U.S. General Motors, meanwhile, sold 1.7 million vehicles in Europe last year, a fifth of its worldwide sales.
The region’s stumbling economy is making it harder for other economies to grow. Policymakers around the world are urging more decisive action — particularly from the European Central Bank — to deal with the crippling debt crisis to restore confidence to the global economy.
“The ECB’s recent announcement that it will do ‘whatever it takes’ to save the euro is welcome, but clarity over what will be done is crucial,” said Tom Rogers, a senior economic adviser for accounting firm Ernst & Young.
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