Has the European economy's nosedive ended? Tomorrow morning, the EU's statisticians in Luxembourg will release one of the most eagerly anticipated sets of data in some time: gross domestic product for the bloc and its subgroup – the 18-member euro zone – for the April-June quarter.
The figures are expected to show, at the very least, that the rate of contraction in the European economy slowed in the second quarter of 2013. There are reasonably well-founded hopes it actually grew between the first and second quarters. It is to be hoped that growth returned to Europe. And that that growth continues.
Without solid and sustained expansion in the years ahead our highly indebted continent faces rupture. The high level of debt, which is itself a major factor in dampening growth (just as the running up of that debt up to 2008 was major factor in spurring growth), cannot be borne unless the capacity to service it increases. That means continuously rising GDP.
Tomorrow’s set of numbers, important and all as they are, will not say much about the medium and long-term prospects for growth, but yet another quarter of decline will bring the continent another step closer to rupture. Expansion will drag it back from the edge.
The short term
From a short-term Irish perspective, tomorrow's numbers from the Grand Duchy will give an indication as to whether demand for goods and services exports will recover, but they will not tell us anything about the domestic economy; Ireland's statisticians are among the last each quarter to publish their figures (inconveniently for everyone, not least those framing Budget 2014, Irish Q2 GDP numbers will not come out until late next month).
Among the first to publish GDP data are the Italians. Their economy is the third biggest in the euro zone, accounting for one-sixth of the currency bloc's total. Italy has been a growth laggard in Europe for almost two decades and its contraction in Q2 of 0.2 per cent on the previous quarter is likely to place it firmly among the slower coaches when tomorrow's numbers come out. The best that can be said is that the decline was the smallest in two years and that, with business and consumer confidence perking up, the second half of the year could bring stabilisation.
Italy and Spain
Spanish numbers show a quarter on quarter decline of just 0.1 per cent – the least bad outcome in almost two years.
With Italy and Spain together accounting one quarter of euro zone GDP, their contraction, albeit by a small amount, means the rest of the bloc will have to expand just to keep aggregate euro zone GDP stable.
Germany and France together account for almost half of the output of the 18-member euro zone bloc. Neither had a good second quarter, but monthly indicators, such as retail sales and industrial production, point to very modest growth in GDP, which should be enough – just – to give the euro zone its first quarter of growth in almost two years.
Beyond the euro zone but closer to home, the British economy performed much better than expected in the second quarter, thereby radically changing the tone of commentary on the economy.
Britain is very far from being out of the woods. The euro zone is in trouble. But tomorrow’s news should, at least, not be bad.
