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.