Why it matters: The Eurozone economy has regained its footing — for now.
Just a few months ago, governments across Europe were bracing for the possibility of a full recession as Europe turned away from Russian natural gas and energy and food bills skyrocketed. But countries quickly stockpiled energy reserves, and a mild winter and massive conservation efforts helped Europe avert the worst.
Data show the eurozone economy is regaining its footing, albeit slowly. During his first three months of the year, big countries such as France and Germany saw an increase in investment and foreign trade. However, neither country is recovering as fast as it should be as a growth engine for the region.
And 6.9% annual inflation is still a big problem. European governments need to provide subsidies to help businesses and consumers survive high electricity and food bills, and step in to help businesses and consumers, increasing the overall debt burden. increase.
The European Central Bank is expected to raise interest rates again next month, raising the cost of doing business. The International Monetary Fund says: report It was announced earlier this month that Europe’s biggest challenge is to keep inflation under control while avoiding a recession.
“We do not expect economic growth to pick up meaningfully in 2023,” Rory Fennessy, European economist at Oxford Economics, said in a report. Rising inflation and tightening financial conditions will hold back growth this year.”
By country: Germany and France lag behind Italy and Spain.
Germany, Europe’s largest economy, has been the hardest hit by the fallout from the Russian war, flattening out after contracting 0.5% in the final quarter of last year. On an annual basis, the growth rate has slowed Eurozone’s largest economy, up 0.1% year-on-year in the first quarter.
Battered by nationwide strikes and demonstrations over President Macron’s move to raise the minimum retirement age, France saw a rebound in foreign trade and activity at factories, including glassmakers and other industrial sites, which had slowed. The economy expanded by 0.2% amid the reopening. Production or temporary closure during the winter months due to rising energy costs.
Growth accelerated in Italy, Belgium and Spain, and Portugal is even further ahead, with the economy expanding by 1.6% in the first three months.
