Despite finally emerging from its record-long recession over the summer, the Eurozone’s economy will grow too slowly next year to significantly reduce unemployment, according to new official projections for growth. The new forecast trims back expectations for growth in 2014 from a 1.2 percent rate to 1.1 percent and reasserts that the overall economy of the 17 countries that use the Euro shrunk again in 2013. It also projects that unemployment will remain high throughout the coming year, declining gradually from its current record high of 12.2 percent to 11.8 percent by the beginning of 2015.
The currency bloc had officially emerged from recession in the second quarter of this year thanks to both stronger than expected growth in Germany and France and eased austerity requirements that meant smaller countries didn’t contract as much as expected. The official projections released Tuesday show, however, that the renewed growth is not enough to counteract the contraction earlier in the year. The Eurozone economy is still expected to shrink by 0.4 percent for the year as a whole.
The area’s overall economic health depends mostly on its largest members, Germany and France. If those countries keep government spending low, it could knock the wind out of the continent’s nascent recovery. As the Wall Street Journal notes, German policymakers have drawn criticism for keeping spending tight rather than seeking to give the continent a boost. Tuesday’s report “offers little hint of a surge in domestic German demand that could help the broader euro zone economy,” the Journal reported.
The forecast for slow job growth and a precarious recovery comes after one European Commission economist published a paper that showed austerity has hurt the continent much more than promised. It found that spending cuts are more damaging than tax increases and confirmed that German spending cuts create “negative spillovers” for the rest of the continent’s economies.
Meanwhile, Republican lawmakers in the United States continue to insist that spending cuts are the top priority. America avoided the double-dip recession from which Europe is now emerging by adopting pro-growth spending policies in the wake of the financial crisis. But since the 2010 election season, the shift to austerity has undermined the U.S. recovery. The government is now contributing less to investments than at any time since the Second World War, and three-quarters of the austerity enacted in recent years have come in the form of spending cuts. Those cuts have cost the country millions of jobs. The conservative fight for spending cuts has also produced multiple legislative crises, which cost the country a further 900,000 jobs.