While the economic state of affairs in the United States loses steam, our European counterparts may have been dragged down with us. A report released today by Eurostat, the official statistics agency of the European Union, confirmed that the Euro Zone suffered its second consecutive drop in GDP over Q3, thus officially placing it in a recession.
The Euro Zone is distinct from the European Union in that it only includes those countries that use the Euro as their official currency. Of the 27 countries that make up the EU, 15 are in the Euro Zone: Austria; Belgium; Cyprus; Finland; France; Germany; Greece; Ireland; Italy; Luxembourg; Malta; Netherlands; Portugal; Slovenia; and Spain.
Q3 saw a -0.2 percent growth rate for the gross domestic product figures of both the Euro Zone and the EU as a whole. With a Q2 GDP drop of 0.2 percent for the Euro Zone (the EU’s Q2 GDP numbers were stagnant), this makes two consecutive quartile GDP drops, officially putting the Euro Zone in a recession.
As in the United States, Europe’s economy has been hit hard by decreased manufacturing and consumer spending, linked to the massive global losses sustained in the credit crisis. Many European governments have extended bailout packages to their financial institutions, pledging to pump up to 1 trillion Euros into the EU’s flagging banks. Germany is responsible for €500 billion, while France has pledged up to €360 billion.
Most individual Euro Zone nations suffered either negative or neutral GDP growth in Q3. Spain, for example, suffered a 0.2 percent loss, while Germany lost 0.5 percent. The United Kingdom, not a member of the Euro Zone, lost 0.5 percent, compared to losses in the United States of 0.1 percent.