Europe Bounces Back -- at Varying Speeds --- Last Period's GDP Shrank, But Recovery Appears To Be Under Way
While the U.S. economy bounced back in the fourth quarter, Europe's own gross domestic product shrank for the first time since 1993, according to the chief European statistics agency. Still, evidence is mounting that a recovery on the Continent is under way.</br></br>Among the 12 countries that share the euro, GDP, the total value of goods and services, contracted by 0.2% in the fourth quarter from the third, Eurostat reported. Growth was dragged down by corporate retrenchment in the face of slackening global demand. But just as it followed the U.S. in its downturn, Europe appears to be moving upward now as well.</br></br>Surveys show that Europe's overall economic mood, as measured by the European Economic Sentiment Indicator, is now at its best since September, and inflation is on the whole falling. Spaniards are building. Italians are using more phone services and burning more electricity. The French keep buying. Lufthansa, the German airline, recently lifted a hiring freeze on cabin and ground crew as it prepares for more flights to the U.S. this summer. "Indicators increasingly point to improvements in economic conditions," Wim Duisenberg, president of the European Central Bank, said last week.</br></br>In its latest growth forecasts, the European Commission agreed. The European Union's executive body predicted yesterday that growth this quarter would be between 0.1% and 0.4%, from last quarter, and would improve further to 0.4% to 0.7% next quarter. "These forecasts confirm that the slowdown is over but suggest that the recovery will be moderate," the commission said in a statement.</br></br>There is a wrinkle. The budding European economy is also unfolding at different rates in different countries. That isn't unusual for a large region, but part of the problem stems from the euro zone's very reason for being: Europe's common currency regime, which limits how much laggard countries such as Germany can spend to jump-start their economies.