Wed August 14, 2013
Eurozone Growth Doesn't Mean Tough Times Are Over
Originally published on Fri August 16, 2013 6:40 am
AUDIE CORNISH, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.
ROBERT SIEGEL, HOST:
And I'm Robert Siegel.
There is a pleasant economic surprise from Europe today. For the last year and a half, the news from Europe has been really bleak; unemployment above 20 percent in a number of countries and no growth. Well, today, new data showed that the eurozone economy actually grew in the second quarter by three-tenths of a percent.
As NPR's John Ydstie reports, though, that doesn't mean tough times are over.
JOHN YDSTIE, BYLINE: Generally, it was northern European countries that saw the most growth in April, May and June. For instance, Germany grew seven-tenths of a percent and France grew by five-tenths of a percent. Portugal, one of the southern eurozone countries that's faced the deepest crisis, surprised everyone and grew 1.1 percent in the second quarter.
Economist Adam Posen, president of the Peterson Institute for International Economics, says he was surprised by the growth. But he says, it doesn't much change Europe's underlying problems.
ADAM POSEN: Southern Europe has very high unemployment, has a lot of debt - a lot of which is bad debt and real estate is still crumbling. Those fundamentals don't change. They're eased slightly if growth improves. And it'd be great if growth improves more but it doesn't change the underlying fundamental.
YDSTIE: Remember, says Posen, in countries like Spain and Greece, roughly one in every five workers can't find a job, and youth unemployment is even higher. And their lack of work experience could slow Europe's ability to grow for a long time.
While today's growth numbers don't change the underlying problems, they do re-enforce that the global financial threat that Europe once posed continues to recede.
POSEN: This news on growth says, OK, we're in a stable situation; that the bottom isn't completely falling out. But again, this is just sort of a minor reinforcement to the pattern that was already there, which is Europe is going to struggle along for the foreseeable future.
YDSTIE: Posen, who served on the Bank of England's interest rate setting committee from 2009 to 2012, says there is some danger that the better than expected growth could lull politicians in the eurozone into some complacency. In the weak economies of southern Europe, that could mean a pullback from the needed labor reforms, for instance. In the stronger northern countries, it could undermine the will to provide aid to the southern countries - after all, if growth is improving, the argument for additional aid is weakened.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.