Politics is hindering Europe’s emergence from its latest downturn, now six quarters long.
PARIS – Europe slipped deeper into a widespread recession, according to data released Wednesday. But when European heads of state meet next week in Brussels, no big announcements about plans to stimulate growth are expected.
As the eurozone economy shrank in the first three months of the year — a record sixth consecutive quarter — economists say the region seems to be in policy paralysis.
With Germany, the Continent’s economic heavyweight, in the grip of pre-election politicking, no big European policy moves are likely until after that country’s elections in September. Even then, it is not clear that anyone has any master strokes planned.
“We don’t see policymakers lifting a finger anywhere in Europe,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said Wednesday. “This is a depression rather than a cyclical downturn, and there must be a policy response if things are going to get better.”
While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data on Wednesday from Eurostat, the European Union’s statistical agency. French President Francois Hollande observed the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism.
“Are we an isolated case?” Hollande said of France. “No, because the recession in Europe and particularly in the eurozone is greater.” He offered no prescriptions for growth other than to say, “If Europe, member states and France organize ourselves to promote growth, then we can return to the hope of a better future.”
Organizing to promote growth, though, seems to be the mission that has long eluded the E.U., whose listlessness contrasts with the performance of other major global economies.
“The political situation in Europe is not conducive to making bazooka decisions,” said Gilles Moec, an economist at Deutsche Bank in London, referring to an allusion by Henry Paulson, a former U.S. Treasury secretary, to the need to have economic firepower in a crisis. “No one’s talking about creating any further jolts to the system.”
The 17-nation eurozone economy contracted 0.2 percent in the first quarter from the last three months of 2012, Eurostat reported Wednesday. That was less than the 0.6 percent decline recorded in the fourth quarter but more than economists’ expectations of a 0.1 percent decline.
France experienced a second consecutive quarter of contraction, the widely accepted definition of a recession, of 0.2 percent. Germany essentially marked time, with growth of only 0.1 percent. The economy of the overall union, made up of 27 nations, shrank 0.1 percent.
Eurostat said it was the first time the eurozone had contracted for six consecutive quarters since the creation of the single currency in 1999.
Moec of Deutsche Bank said low consumer demand, tight lending policies by a banking sector that is trying to shrink and corporate layoffs were are contributing to the decline. For most of Europe, Moec said, “It’s a perfect combination of nasty headwinds.”
Philippe d’Arvisenet, global head of economic research at BNP Paribas, estimated that the eurozone economy would shrink about 0.5 percent this year, after a 0.6 percent contraction last year. Growth will probably return in 2014, he said, “but probably below 1.0 percent.”