Euro zone economy in an extended recession

The euro zone is experiencing a long spell of recession with the economy continuing to shrink during January-March 2013 quarter as well, quick estimates released by euro zones statistical agency Eurostat showed.

GDP in the 17-member euro area (EA17) fell 0.2 per cent with output falling across the bloc, from France to Finland in the January to March period, Eurostat said.

Recession in the bloc, which dates back to the fourth quarter of 2011, is now longer than the five quarters of contraction that followed the global financial crisis in 2008-09. It also tends to dampen optimism of a quick recovery.

GDP fell 0.1 per cent in the larger euro area (EU27) during the first quarter of 2013, compared with the previous quarter, according to Eurostat.

In the fourth quarter of 2012, growth rates were -0.6 per cent and -0.5 per cent, respectively.

Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 1.0 per cent in the EA17 area and by 0.7 per cent in the EA27 in the first quarter of 2013, after a decline of 0.9 per cent and 0.6 per cent, respectively, in the previous quarter.

The euro zone's debt and banking crisis that has driven unemployment to a record 19 million people has now seeped across Europe sucking in wealthy states as well, although the European Central Bank's promise to buy the bonds of struggling governments has removed the threat of a euro zone break-up.

Germany, the EU's strongest economy. barely managed to grow 0.1 per cent in the first quarter of 2013.
 
Against this, GDP in the United States grew by 0.6 per cent during the first quarter of 2013, compared with the previous quarter (after a 0.1 per cent growth in the fourth quarter of 2012).

Compared with the same quarter of the previous year, GDP in the US rose 1.8 per cent (after 1.7 per cent increase in the previous quarter).

EU leaders are now trying to shift to fiscal expansion and away from the budget cuts to deal with the slump that followed the debt crisis.

The European Central Bank (ECB) cut the cost of borrowing to a record low of 0.5 per cent this month in order to break a damaging cycle of reduced governments spending, lay-off by companies, declining consumption levels and lack of employment opportunities.