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Wed August 14, 2013
European Union Emerges From Recession
After a record 18-month slump, the European Union is coming out of a recession.
Numbers released today show three-tenths of a percent growth for the second quarter of the year.
While that may not sound like a lot, it is a signal that a much-needed recovery to pull the eurozone out of its three-and-a-half-year debt crisis may be here.
- Andrew Walker, economics correspondent for the BBC.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
After a record 18 months slump, the European Union is coming out of recession. Numbers released today show three-tenths of a percent growth for the second quarter of the year. And while that may not sound like a lot, it is a signal that a much-needed recovery to pull the eurozone out of its three-and-a-half-year debt crisis may be here. Andrew Walker is an economics correspondent for the BBC, and he is with us from London. Andrew, welcome.
ANDREW WALKER: Thank you very much, Jeremy.
HOBSON: So this is good news, obviously, but what's driving it?
WALKER: Well, good news, yes. But let's not get carried away. I mean, as you suggested, mere .3 percent is not really very strong, and it's certainly not enough to do anything very much about what's - about the great economic problems that the eurozone is facing. A very high unemployment in some countries and government debt burdens that are very difficult to service, but certainly a step in the right direction.
What's driving it is a pattern of different things in different countries, but certainly, some return of consumer confidence and consumer spending has been an important factor in Germany, France and some other places too. In the case of Germany, investment also growing. In fact, in Germany, it was a pretty broad-base recovery. There was growth across most of the main sectors. In the case of France, there was a bit of a disappointment in that fixed investment continued to decline, although not as rapidly as before.
It's worth also just mentioning that for the most part, with the countries at the heart of the crisis, they did continue to contract. So we're talking about Greece, Italy and Spain. But the good news - and I suppose this does have to be counted as good news - was that they were contracting less rapidly than before.
HOBSON: Well, tell us about that. What's going on in these very hard-hit countries? We know that in Spain, the unemployment rate is about 25 or 26 percent. Portugal is not doing very well, and Greece. Tell us what's going on in those countries.
WALKER: What seems to be happening there is that there is some degree of confidence returning. Businesses are beginning to look at the possibility of expanding no more than that, I have to say for the most part. And there really are some signs of - a number of signs in those countries that activity is beginning to stabilize. We've had some figures for, for example, for unemployment in Spain, which actually came down in the most recent days only by one-tenth of a percentage point, but it's still a move in the right direction.
But I think in the longer term, this is part of a bigger story that really begun just over a year ago when Mario Draghi, the president of the European Central Bank, made his whatever-it-take speech as it were when he said that euro - the European Central Bank would do within its mandate - in other words, without endangering the inflation target - but would do whatever it takes to preserve the euro. And he did let set out some plans, the willingness in principle to go into the markets to buy government debt, if it was necessary. He hasn't actually done it. The European Central Bank hasn't spent a single euro on that exercise. But nonetheless, the mere fact that he said it might happen has brought some stability to financial markets and that has gradually, slowly fed through to the wider economy.
HOBSON: And, Andrew, in the few seconds we have left, if growth is really coming back, how much better a position is Europe in when it comes to the amount of debt that these countries have?
WALKER: Well, if this really is the beginning of a recovery - and bear in mind, most economists are not actually expecting much of an acceleration - but it does mean that there'd be a - there's some prospect of getting a bit more tax revenue coming in for countries that have got debt problems. And that makes those burdens a little bit harder to deal with, but it still - there is still an awful long way to go.
HOBSON: The BBC's economics correspondent Andrew Walker joining us from London. Andrew, thanks.
WALKER: My pleasure, Jeremy.
HOBSON: And when we come back, a new spin on matchmaking in India. Stay tuned for that. HERE AND NOW. Transcript provided by NPR, Copyright NPR.