Two weeks after announcing a record high unemployment rate, Europe’s official economic analysts today revealed another first for the currency union: The Eurozone’s ongoing recession is now the longest in the 14-year history of the euro. The Guardian notes the European economy has now shrunk a full percentage point over the past year:

The eurozone has slumped into its longest recession ever, after economic activity across the region fell for the sixth quarter in a row. […]

France, Spain, Italy and the Netherlands all saw their economies shrink as the economic crisis in the eurozone continued to hit its largest economies.

Eurostat’s figures showed that the eurozone economy has now contracted by 1% over the last year, putting further pressure on leaders as unemployment climbs to new record highs.

The 0.2% contraction in the first quarter of 2012 was an improvement on the 0.6% drop recorded between October and December, but analysts warned that the eurozone’s economic outlook is darkening.

This is the second ugly bit of record-setting in two weeks, after the Eurozone’s unemployment rate hit 12.1 percent at the end of April. It was the 23rd consecutive month of record-breaking unemployment, with 26.5 million people out of work.

These records seem to have created some space for European policymakers to begin at least discussing an end to austerity. For example, French finance minister Pierre Moscovici reacted to the news that France’s economy had contracted for the second straight quarter by calling for pro-growth policies to return across the Eurozone.

So far, however, the damagingly aggressive reduction in deficits is projected to continue in Europe. And American deficits are now projected to dip even more dramatically than those in Euro countries.

The drop in aggregate Eurozone deficits looks alarmingly similar to the rapid decline in U.S. deficits CBO now projects for 2013. According to European Commission projections for 2013, the countries that use the euro will have cut their combined deficits to 2.9 percent of GDP by the end of the fiscal year, down from 6.4 in 2009. The new CBO figures predict U.S. deficits are shrinking even more dramatically, to 4 percent this fiscal year from over 10 percent in 2009.

In other words, as Europe’s deficit-slashing fever produces a record contraction, American policymakers are learning they’ve outdone their Old World colleagues. But where Europe’s outright contraction may be forcing a policy reversal, slow but steady economic growth in the U.S. seems to be obscuring the lessons from bad headlines across the Atlantic.

The European Commission today revised previous estimates showing that Europe would return to economic growth this year, now saying that the continent may be mired in recession until 2014 due in part to “record joblessness“:

The 17-nation bloc’s economy, which generates nearly a fifth of global output, will shrink 0.3 percent in 2013, the Commission said, meaning the euro zone will remain in its second recession since 2009 for a year longer than originally foreseen.

The Commission, the EU executive, late last year forecast 0.1 percent growth in the euro zone’s economy for 2012, but now says tight lending conditions for companies and households, job cuts and frozen investment have delayed an expected recovery.

Of course, one of the causes of record joblessness is the continued austerity to which Europe has been subjected thanks to, among others, the European Commission. This chart shows that austerity has gone hand-in-hand with economic contraction in Europe:

But the European Commission has shown no evidence that it plans to recommend a move away towards austerity. And Eurozone officials can’t even handle mild criticism of their continued adherence to a policy that has delivered none of the promised results without lashing out. In the meantime, misery on the continent continues.

Voters in Italy — while not giving any party firm control of their government — did deliver a rebuke to austerity during yesterday’s national elections. “This election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” Simon Tilford, the chief economist of the Center for European Reform, told the New York Times.

But Eurozone Commission President Jose Barroso (who holds the highest EU office) wants to make sure that other Europeans don’t get any ideas regarding ditching their own austerity programs following Italy’s results:

Speaking at a Reuters summit on the future of the euro zone, Barroso said efforts to revive Europe’s economy would take time and required determination. The fact Italian voters had turned Monti out of office did not mean his policies, or those advocated by the European Union, were wrong.

“I hope we are not going to follow the temptation to give in to populism because of the results in one specific member state,” Barroso, speaking with passion, said of the EU’s efforts to combat the sovereign debt crisis.

“The question we have to ask ourselves is the following: should we determine our policy, our economic policy, by short-term electoral considerations or by what has to be done to put Europe back on the path to sustainable growth? For me the answer is clear.” [...]

Barroso said it was incumbent on all EU and euro zone countries, especially those receiving aid from the bloc’s rescue funds, to retool their economies and cut deficits in an effort to improve competitiveness and stimulate growth.

Barrosso is far from the only EU official imploring countries to stay the course, despite the clear evidence that austerity is stifling economic growth in Europe while not delivering significant debt reductions, as these two charts from economists Paul De Grauwe and Yuemei Ji show:

As De Grauwe and Ji wrote, “As it becomes obvious that the austerity programs produce unnecessary sufferings especially for the millions of people who have been thrown into unemployment and poverty, resistance against these programs is likely to increase. A resistance that may lead millions of people to wish to be liberated from what they perceive to be shackles imposed by the euro.”

The European economy, beset by high unemployment and austerity measures aimed at reducing debts and deficits, will contract again in 2013, according to the continent’s official economic body. That would make 2013 the second consecutive year, and third in the past five, in which the 17-nation Eurozone’s economy will have shrunk, adding to its already record-high unemployment rate and further complicating the deficit reduction efforts it has pursued without fail since the end of the global recession.

Another contraction would especially hit the countries that have already been hurt the most by the recession and resulting austerity, the European Commission said. The Wall Street Journal reports:

The European Commission, the EU’s executive arm, forecasts a 0.3% contraction for 2013 and sees falling spending by businesses, consumers and national governments pushing euro-zone unemployment to a new high. Mass joblessness is expected to increase in the countries hardest hit by the crisis, with the average unemployment rate expected to reach 27% in Greece, 26.9% in Spain and 17.3% in Portugal.

Slow growth, and in some cases the lack of growth at all, has already hampered deficit reduction efforts, causing Spain, Greece, and France to miss deficit targets. French president Francois Hollande announced this week that he would not pursue further austerity to hit this year’s deficit target. The Eurozone officially fell back into recession in November.

The Eurozone has seen economic growth sputter and joblessness spike in the wake of severe austerity measures adopted over the last several years. But while most of the EU (along with Great Britain) is doubling down on austerity, French President Francois Hollande is calling for the opposite. During a trip to Athens (poster child of Europe’s economic catastrophe), Hollande inveighed against “austerity without end“:

François Hollande will make his first visit as French president to Greece on Tuesday carrying the same anti-austerity message to Athens that won him election to the Élysée Palace last May.

As he put it in a pre-visit interview with the Athens newspaper Ta Nea, it was essential for Europe to support growth in Greece, reeling from years of financial crisis and recession. “I reject a Europe that condemns countries to austerity without end,” he declared.

The complicating factor, as the Financial Times Hugh Carnegy noted, is that France is bound by the same budget targets as the rest of the EU, so it may have to engage in more austerity. But France’s Finance Minister is making some noise about breaking with France’s earlier budget targets. “I don’t think our credibility will be damaged if something exceptional intervenes,” finance minister Pierre Moscovici said yesterday. “If we have a deeper recession, we’ll have an even tougher time hitting our targets. We must not add austerity to the risk of recession.”

As this chart shows, European austerity has gone hand in hand with increasing unemployment (even as EU debt loads have increased):

Meanwhile, here in the U.S., Republicans are embracing austerity of their own, cheerleading huge looming, budget cuts.

The economic news in Europe continued to get worse on Thursday, as the Eurozone fell even deeper into recession, contracting by 0.6 percent in the fourth quarter. This is the first time since 1995 that the Eurozone has produced no quarters of growth over a full year:

It marked the currency bloc’s first full year in which no quarter produced growth, extending back to 1995. For the year as a whole, gross domestic product (GDP) fell by 0.5 percent.

Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, EU statistics office Eurostat said on Thursday, following a 0.1 percent output drop in the third.

The quarter-on-quarter drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a Reuters poll of 61 economists.

Even supposedly mighty Germany saw its economy contract by 0.6 percent. Across the whole of the Eurozone, only Estonia and Slovakia experienced economic growth.

This is more evidence showing that European austerity has been an utter failure. Instead of ushering in prosperity, attempts to slash deficits and debt have actually caused more debt by depressing economic growth. As this chart from Paul Krugman shows, austerity goes hand in hand with unemployment:

But lawmakers in the U.S. still want to follow Europe’s lead, slashing spending while unemployment remains stubbornly high. The so-called “sequester” set to take place on March 1 will cost the country one million jobs, according to the Bipartisan Policy Center.

Since the onset of the financial crisis, European countries have attempted to deal with their economic malaise by implementing austerity packages, slashing government spending and laying off public workers. However, such measures have proved self-defeating, as the austerity measures blunted economic growth and caused Europe’s debt to actually grow:

The eurozone failed to reduce its government debt in the third quarter of last year, as meager growth offset efforts by several of the bloc’s 17 nations to improve their finances by cutting spending and raising taxes, according to official data released Wednesday.

The countries’ total government debt relative to their annual economic output was barely changed at 90 percent of gross domestic product in the third quarter of 2012 compared with 89.9 percent for three months earlier, the EU’s statistics office Eurostat reported. It was up from 86.8 percent of GDP a year earlier.

Austerity has also, among other things, pushed Eurozone unemployment to a record high and threatened Great Britain with a triple-dip recession. Both the International Monetary Fund and the International Labor Organization have warned against further fiscal consolidation, saying that it would quash economic growth even more, thereby doing nothing to reduce debt loads. The National Institute for Economic and Social Research found that European debt loads will be higher, not lower, because of austerity.

But European officials show no signs of slowing down, as the top EU economic official recently doubled down on austerity. “Any lapse into complacency would be unforgivable. We need to stay the reform course to revitalise the European economy,” he said.

The Eurozone got some more discouraging economic news today, with industrial output dropping by its largest amount in three years. Eurozone unemployment recently hit yet another record high of 11.8 percent, with 18.8 million out of work. Spain’s unemployment rate is nearly 27 percent.

But the Eurozone is going to keep right on going with its austerity program, according to its top economic official:

The worst of the euro zone debt crisis may be over, but governments must not let up on reforms or budget cuts if they want to put the turmoil firmly behind them, the EU’s top economic official said on Friday.

In a speech to diplomats and industry officials, EU Economic and Monetary Affairs Commissioner Olli Rehn called for prioritising investment, fighting youth unemployment, continued reduction of budget deficits and tighter economic integration of the 17-member single currency area.

“Our patient may be out of intensive care, but it will still take some time before she can be given a clean bill of health,” Rehn said. “That’s why any lapse into complacency would be unforgivable. We need to stay the reform course to revitalise the European economy,” he added. [...]

[L]ower deficits were still central to emerging from the three-year public debt crisis, Rehn said, even though their is increasing debate about the impact of austerity on growth.

Spain is the case study in how budget deficits have nothing to do with the current Eurozone crisis: Spain has the Eurozone’s highest rate of unemployment, yet had balanced budgets before 2008.

The International Monetary Fund recently admitted that it vastly underestimated the detrimental effect of austerity spending cuts, and is now recommending that countries dial back their spending reductions in order to prevent stifling of economic growth. But European nations are stubbornly charging ahead. The UK, in fact, is headed towards a triple-dip recession, as its government doubles down on austerity.

Unemployment in the Eurozone hit yet another record in November, clearing 11.8 percent, according to Eurostat. 18.8 million residents of the Eurozone are out of work, the most since the single currency was created in 1999. Across all of Europe, 26 million citizens are jobless.

As the Associated Press noted, “governments across Europe have introduced tough austerity measures, such as slashing spending and raising taxes. However, measures such as cutting wages and pensions hit the labor force in the pocket and reduce demand in the economy.” Austerity measures have also driven the U.K. to the brink of a triple-dip recession. And the U.S. is scheduled to enact an austerity package larger than that passed in many European countries, if spending cuts that are on the books actually take effect, as this chart shows:

The International Monetary Fund recently admitted that it vastly underestimated the detrimental effects austerity would have on world economies. Europe is providing a prime example of the consequences of that mistake.

The U.S. came out of its economic slump faster than Europe due, in part, to its embrace of stimulus over austerity. But recent budget deals have the potential to reverse those gains.