Eurozone issues are nothing new to the global economic community. This group of once fully independent European nations, has had its hands full in directing the now amalgamated economies of such a diverse consortium of cultures. As the Eurozone is struggling again, the question begs to be asked, ‘what’s new?”. These most recent issues however are raising global concern as international merchants worry about the effects of slow third quarter growth, and significant GDP contraction in two of the three largest member nations, France and Italy. The journey to complete economic integration in the Eurozone has been a long and tattered road, leaving many casualties in its wake. Regardless of the casualties however, it appears that business must go on, and with the recent news regarding the condition of the 17-country economic giant, big business, and the world, is watching carefully.
The eurozone has had rough going over the last couple of years. The single-currency group just endured 6 quarters of negative growth, and with the way things are looking it’s not clear whether the previous two quarters should be construed as a legitimate recovery. GDP growth looked positive at .3% in the second quarter, but slowed significantly to just .1% in the third quarter of this year. Amongst the bleak information that surrounds the current state of the group of nations, according to JPMorgan economists, Germany showed annualized GDP growth of 1.3% in the third quarter. This would seem like good news, if it wasn’t down by more than half of the previous quarters growth. Italy’s contraction in GDP was nothing new as it continues its more than two year trend of economic contraction. To complete the disappointing news coming from the three largest eurozone nations, France turned in a report card that signaled an annualized .6% GDP contraction for the third quarter.
Although it is a far cry from a solid trend, this hard data taken alone, if we focus on semantics and technicalities, could be used to suggest that a recovery has begun. When combining other, more real-life figures like labor statistics however, the picture quickly reverts to doom and gloom. All-time high unemployment figures throughout the eurozone cast a dark shadow over any optimists wishing to believe in a sustained recovery. At the end of the third quarter, the collective countries boasted a record unemployment rate of 12.2%. One has to keep in mind however that this is figures varies significantly when analyzing the countries separately. Germany, the strongest of the countries within the eurozone, when looked at alone doesn’t show any alarming rate of unemployment. In Greece however, more than half of the youth (those under 25) were found to be out of the workforce. Thus, as the eurozone struggles with the what new ailments plague it, it is difficult not to let the mind wander into asking, “what will Nigel Farage say about this?” Nigel’s comments have the potential to be even more explosive than the data itself.
So, why does this all matter so much? Why should anyone care besides the large institutional trader, international corporate planner, the average EU politician, and the individual currently in the eurozone that might be suffering the effects of the above mentioned data? Since 2008 the world has been stumbling under the burden of a global financial crisis. A crisis begun by US credit securities gone-wild since the repeal of Glass-Steagall by the Graham-Leach-Bliley Act . Since then, yes, there has been the occasional whisper here and there and the attempted show of confidence that the worst was in the past, but it doesn’t seem that the general public, or even those giving the message of confidence have totally believed that things have turned around for good. It has been somewhat like navigating through a post cold-war minefield recently, and the latest news coming out of the eurozone seems to suggest that the end of the minefield, if there is an end, is not yet in sight. So as the eurozone struggles with more disappointing figures, and prepares to deal with what it will face in the future, if you ask Nigel Farage what should be expected, it’s likely he’d suggest, “nothing new.”
By Daniel Worku