Merde! Mein Gott! French and German economies contracted in Q4

Brace yourself, there's more bad news. Both the German and French economies contracted in the final quarter of 2012, prompting fears that the eurozone will wallow in recession for even longer.

by Michael Northcott
Last Updated: 19 Aug 2013

If you thought that the Teutonic powerhouse would stay afloat by just pumping out Porsche and Mercedes cars ad infinitum, you’ve got another think coming. Europe’s largest economy has announced that GDP shrank 0.6% in the last three months of 2012 thanks to a decline in exports. It seems whomever they were exporting to has finally decided that new Bimmer will have to wait.

Of course, Germany does produce a lot more than just cars. But this is the most severe contraction the country has experienced since the first quarter of 2009, which was at the very height of the global financial meltdown. But given that the German economy was still in growth mode just a few months ago, Europe was essentially relying on it to keep the engine running, so to speak.

Across the Channel, things are not much better. The French economy contracted by a smaller 0.3% in the final quarter, and some are predicting that the country is heading for a recession. Two consecutive quarters of economic contraction is widely considered to be the threshold so they’ve only got a quarter left to turn things around. Still, bosses at France’s central bank are sticking their fingers in their ears and saying ‘déchets, déchets, déchets’, forecasting that the economy will expand in Q1 of this year. We’ll see if they’re right.

Of course, in southern Europe the situation remains pretty dire. Italy has been in recession since the middle of 2011, and in the last three months of 2012, the economy contracted by a massive 0.9%. Prime minister Mario Monti is in the process of enforcing some bleak austerity measures in an effort to cut sovereign debt and keep markets lending. 

But there are at least some signs that the worst may be over. The eurozone purchasing managers’ index (PMI), which surveys firms about their business expectations, indicates that Germany, Spain and Italy are all stabilising. Croisons les doigts that France follows suit…

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