The Eurozone remains idling but manages to overcome the recession

2023-09-07 15:56:43

The war in Ukraine, high inflation and increases in interest rates continue to impact economic activity in the Eurozone. In the second quarter of the year, the Gross Domestic Product (GDP) of the countries of the common currency increased by just 0.1%, according to data published this Thursday by the European Statistical Office (Eurostat). The organization thus lowers its August forecasts – in which it estimated that the Eurozone economy would grow by 0.3%. In that same period, the Spanish Gross Domestic Product (GDP) increased by 0.4%.

Lithuania led Europe, with an economic acceleration of 2.9%, followed by Slovenia (1.4%) and Greece (1.3%). The bad data for the euro zone is largely due to the economic contraction in Italy – 0.4%, 0.1% more than expected – since Ireland only grew 0.5% compared to 3 .3% that was expected in August.

Germany, the Eurozone’s largest economy, also stagnated. Its economy remained unchanged in the second quarter, but it avoided the recession it entered at the beginning of 2023. Economic activity in France, for its part, advanced 0.5%, while Poland (-2.2%) and Sweden (-0.8%) entered negative territory. On the other side of the Atlantic, the US economy grew 0.5% between April and June.

ECB meeting

The cooling of the economy was one of the risks that the European Central Bank (ECB) assumed with the rise in interest rates. Now, with these at 4.25% and inflation showing signs of persistence – it remained unchanged at 5.3% in August – attention is focused on the meeting that this institution will hold next week in Frankfurt. A new rate hike is not ruled out. Its president, Christine Lagarde, insists that price stability remains the ECB’s main mandate and that it will “do everything in its power” to curb inflation.

The data published yesterday by Eurostat also confirm the resilience of the Eurozone labor market. With unemployment at historic lows, the number of employed people increased by 0.2% in the second quarter of the year. Lithuania, Malta and Portugal were the countries that created the most jobs. In Spain, which continues to lead the Eurozone in the unemployment rate, employment remained unchanged.