The eurozone has just shrunk for six straight quarters, making this the longest recession since the euro was born more than a decade ago. Nine out of the 17 economies that use the single currency are now contracting. And the second largest — France — has just slipped into a double-dip, its second recession in a row.
France has many flaws as an economic power. But the country’s biggest problem right now may be…geography.
“The economy in France is largely dependent on Europe. Europe is its main trading partner,” says Douglas Yates of the American University in Paris. “With Europe near zero percent growth, that affects French exports.”
Sales of French cars, chemicals, food, pharmaceuticals and clothing have slumped especially in France’s two biggest markets: Spain and Italy. But will Germany — Europe’s giant economic locomotive — pull the continent out of the mire? Not likely, says Michael Steen of the Financial Times.
“Germany which is the growth engine supposedly is just barely crawling out of negative territory,” says Steen. “It shrank in the fourth quarter of 2012. It’s just growing a little bit now.”
Europe is sinking under its own homegrown debt crisis. It’s weighed down by austerity measures and traumatized by radical economic reform, largely prescribed by Germany. And yet in a globalised world the effects of Europe’s malaise are felt well beyond its borders, the effects are lapping up on the other side of the Pond.
“Our colleagues in the United States are still deeply concerned about developments in the euro area.”said the head of Britain’s central bank, Sir Mervyn King at a news conference today. He claimed that the United States and Asia are praying for Europe’s recovery which “if it were to happen would go a very long way to help the world economy as a whole.”
In other words: France, Spain, Italy and Europe’s other troubled economies are not only dragging each other down, they’re proving a real drag for the rest of the world, too.
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