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Eurozone Finally Free From Recession, Will It Last?

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Eurozone Finally Free From Recession, Will It Last?

The euro traded steadily on Thursday morning after eurozone GDP data confirmed speculation that the 17 nation bloc finally exited its longest ever recession. The common currency traded at $1.3291 in the wake of the positive data.

The Wall Street Journal reported that the bloc's second quarter growth was 0.3 percent; 0.1 percent higher than economists' expectations and a sharp contrast to the region's first quarter contraction.

Germany led the region with 0.7 percent growth followed by France which posted growth of 0.5 percent. Even Portugal, a traditionally struggling economy, grew by 1.1 percent; which most are attributing to the timing of Easter and an increase in fuel exports. Several eurozone nations, including Spain, Italy and the Netherlands, remained in recession.

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The eurozone's return to growth after six straight quarters of recession is certainly something to celebrate, but economists are warning eurozone policy makers not to break open the bubbly just yet. Several factors still plague the region and threaten to end its recovery before it really begins.

High unemployment figures throughout the bloc have contributed to depressed consumer spending as well as a sense of disillusionment and hopelessness. Several members are struggling with political uncertainty as national governments attempt to sure up banks and boost their country's growth potential.

Now, the biggest worry is that eurozone policy makers will become complacent without any immediate crises. Moving forward the region will be tasked with de-leveraging banks and creating a unified banking structure that breaks the link between failing banks and national governments.

Eurozone policymakers are also likely to face yet another debate over Greek debt restructuring as the nation looks unlikely to meet its targets.

 

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