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Eurozone Economies 2013

Where is the Upturn?


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By Erik Neilson
Thursday, February 21st, 2013

2012 was certainly not a great year for the Eurozone economy, and it appears as if early 2013 may end up being just as bad off.

According to Fox News, president Mario Draghi of the European Central Bank (ECB) spoke to European lawmakers earlier in the week regarding the economic outlook for euro nations in early 2013. Draghi stated that the economy will likely remain weak at the beginning of the year but is expected to see a “gradual recovery” as the year progresses.

2012 marked the first year since 1995 in which the Eurozone’s GDP did not see growth during any quarter. As a whole for the year, the GDP ended up dropping 0.5%, Reuters reports.

Germany and France—two of the Eurozone’s largest economies—both experienced a shrunken economy in 2012, and it appears as if things are changing more slowly than initially expected.

Not surprisingly, the price of crude oil fell on Tuesday in response to Draghi’s claims that the economy would continue to remain weak throughout the early part of 2013. Benchmark crude oil fell to $95.52 per barrel on the NYMEX, following predictions that the Euro region’s economy would shrink .3% this year.

It’s fair to say that other issues within the Eurozone have also raised investor concerns, particularly those with a political slant. Bribery charges, for example, have caused Spain’s prime minister Mariano Rajoy to resign, while polls in Italy appear to favor Silvio Berlusconi in next week’s election—a politician who has called for billions in tax rebates for Italians who haven’t paid them.

It should come as no surprise that the biggest economies in the Eurozone are those which set the tone for this recession. Germany’s economy shrank by 0.6% on the quarter, marking the country’s worst showing since the global financial crisis of 2009, Reuters reports. France shrunk a bit less at 0.3%, although the numbers are still alarming to many analysts.

In Berlin, exports (a major aspect of their economy) had a huge impact on the shrinking of the economy, performing far worse than imports; economists don’t see this as a lasting trend, however.

Spain has also seen its fair share of economic troubles as of late. The fourth-largest member of the Eurozone recently released figures that clearly show they remain in a recession in the early part of 2013 after a dip of 0.7% in the fourth quarter of 2012, Reuters says. The country is doing everything it can to cut its debt, with many analysts believing that lower wages and layoffs are creating more streamlined, productive companies in the area.

The European Central Bank has pledged to do whatever it can in order to save the euro. Draghi may be pessimistic about the beginning of the year, but he expects to pull out of the recession by mid 2013.

Nevertheless, the economic depression has had a visible effect on even the strongest members of the Eurozone, as French prime minister Jean-Marc Ayrault said Wednesday that the lack of growth will likely make it difficult for France to reach their 2013 deficit goals.

Germany remains optimistic. While it’s too soon to tell, the country is expected to bounce back in the first quarter thanks in large part to a large pick-up of factory orders in December of 2012.

Many of the expectations regarding an upturn in the Eurozone’s economy are based upon the fact that fears about the euro falling apart are not nearly as omnipresent as in the past. Cheap credit is also thought to be helpful in creating a turning point for the euro, although it is—again—too soon to tell.

The upturn for 2013 is expected to come from the bloc’s larger members; Germany is expected to see improvement first, followed closely by France. According to ECB predictions, as cited by Reuters, the Eurozone is expected to pick up during the later part of the year. January data, while limited, has already seen an improvement over much of the data from 2012.

It could take many more months until a significant upturn can be reported in good conscience, however. For now, each nation in the Eurozone can only continue to do its part to improve its own economy.


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