Germany once again helped the 19-country eurozone eke out steady, if unspectacular, economic growth in the first quarter of the year. The hope is now that others, such as France and Italy, will start to pull their weight more and push growth even higher this year. Eurostat, the EU’s statistics agency, confirmed Tuesday that the region, which spans from Ireland in the west to the Baltic states in the east, grew by a quarterly rate of 0.5 percent. The update also confirmed that the eurozone performed better than the U.S. in the first quarter. The U.S. economy, according to Eurostat, expanded by a quarterly 0.2 percent.
The eurozone’s growth rate isn’t bad, but it’s not great either – roughly in line with its recovery from recession that started four years back. There is evidence, however, that the eurozone could pick up pace in coming months, especially as some of the political worries that clouded its immediate future have dissipated, with the defeat of populist politicians in elections, most recently Marine Le Pen in France.
French President Emmanuel Macron, inaugurated Sunday, is inheriting an economy that appears to be gaining traction, even before any potential boon from his economic agenda, which includes cutting taxes on companies and labor, investing more in technology and promoting freer trade.
Expectations are high that the French economy will do better in the second quarter than it did in the first, when it expanded by 0.3 percent. That’s not enough for France to really dent its unemployment rate, which has stood above 10 percent for years. In particular, surveys of business activity as measured by financial information company IHS Markit are increasingly rosy about France.
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The country certainly has some catching up to do, particularly with Germany, which has been driving eurozone growth in recent years. That was evident in the first quarter, when Germany’s growth was double France’s at 0.6 percent.
One of the major problems afflicting the eurozone during the recovery has been how reliant it has been on Germany. The hope in Berlin is that other countries will emerge as pillars of growth, especially now that the region appears to have set aside its debt issues. Italy, which is one of the region’s big debtors but avoided needing a bailout like Greece or Portugal, is another country that has been advancing at a crawl. However, like France, there are signs of improvement there, too.
”Looking ahead, economic data for the second quarter suggest that growth could accelerate as we head towards the summer months,” said Oliver Kolodseike, senior economist at the Centre for Economics and Business Research. ”Encouragingly, the data signal a broad-based upturn.”
Of the large majority that have released first-quarter figures, only Greece showed output declining, albeit by a bare 0.1 percent. Greece has now shrunk for two straight quarters – the technical definition of a recession. The Greek economy is 25 percent smaller than it was eight years ago following a brutal recession associated with its debt crisis and accompanying bailouts.
The latest setback, which followed a period of modest growth, has come as the Greek government and its creditors in the eurozone and the International Monetary Fund haggled over what was needed for the next release of bailout funds.
With Greek lawmakers now set to approve further austerity measures, there are hopes that the ensuing release of more rescue funds. That, in turn, should shore up confidence that Greece won’t be heading for another crisis that would see it skirt with bankruptcy and a potential exit from the euro.