Thursday, 14 February 2013

GDP is falling down...

Eurostat published its latest statistics on Q4 2012 in the Eurozone. Nothing that we did not expect actually: Portugal -1.8%, Cyprus -1.0%, Italy -0.9%, Spain -0.7%. No statistics were published regarding the state of the Greek economy.

These results indicate that during the last three quarters the Eurozone had a contraction in each and every one of them. (I would remind you that the definition of a recession is two consecutive quarters with negative GDP growth. And we are experiencing three...)

What many did not expect though was the following:
Germany: -0.6%
Finland: -0.5%
France: -0.3%
UK: -0.3%

We all thought that the German economy was impervious to such things as recessions right? Well, let me remind you that this was a not-so-unexpected phenomenon. I have explained that the recession would have a very important effect on the German exports (which are about 60-65% to countries within the EU, and specifically within the Eurozone) in this article published in mid-November. Wolfgang Schäuble was said to secretly prepare for this downfall in the last days of 2012 by "cutbacks to prepare for a weakening economy and possible fallout from the euro crisis" (for details read this).

It looks like this time is now here for Germany. I have no other explanation for persistence in plans which do not work than obstinance and illusory beliefs and views of the world. If Schäuble is allowed to do the same with Germany as he proposed (and unfortunately pulled through) with Greece, Spain, Portugal and Cyprus the Germans are in for a much worse fate than they expected. 

And this will only be the beginning...


  1. Have you seen the analysis that argues that Spain is to become the new economic miracle of the Eurozone in a couple of years?
    German contraction was of course to be expected - this is one of the reasons they so heavily pushed for a budget cut, together with the UK. As for France, well, things are rather "fluffy" there to begin with, and the Hollande administration is not helping. Curious about Finland though. Very curious.

    1. To be honest I haven't seen it but the rationale behind it is clear. There has been a plethora of start-ups in Madrid and they seem promising. If even 40% of them work you may imagine how much better they are going to be by 2020. It's why we have been shouting about innovation for nearly 2 months now!

      You are right about Germany and France, although I think that the latter will be in less trouble than the former in the next few quarters. I'm very curious about Finland as well. Wondering if it is just an outcome of the crisis or if there is something else behind it...

      P.S. If you still have the link to the analysis you mentioned could you please post it?

  2. I can't seem to find the original article I've read, but here is the piece of news on it: