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European economy
Recession warnings as EU big three contract
Article published on the 2008-08-14 Latest update 2008-08-14 15:02 TU
French Finance Minister Christine Lagarde
(Photo: Reuters)
France's Gross Domestic Product contracted by 0.3 per cent in the second quarter of 2008, while Europe's largest economy, Germany, shrank 0.5 per cent and other European countries published worrying statistics. Amid concern that the EU may be following the US towards recession, French Finance Minister Christine Lagarde accused some commentators of "crying wolf".
French consumer-spending has stagnated, with petrol and food prices rising faster than incomes, while more than 12,000 jobs have been lost in the second quarter.
Both exports and imports have also declined, usually a sign of economic slowdown, while companies are reported to have reduced investment and job-starts.
Lagarde was quick to point out that this is not technically a recession, defined as three consecutive quarters of negative growth, and said that the government will not change its economic policies.
"We must continue to support measures that encourage competition and continue to renew the job market, labour market and the market for goods and services," she said.
Germany, whose economy accounts for about a third of eurozone output, also suffered from inflation and shrinking exports.
But Christian Dreger at the German Institute for Economic Research says the pessimism may not be warranted.
"When you compare the first half of 2008 with previous halves of some years, then you still have growth," he says. "Of course quarterly growth rates fluctuate much more and probably this can lead to some misinterpretation."
Italy's economy also declined 0.3 per cent, while Spain's and Austria's grew, but at only 0.1 per cent and 0.4 per cent respectively.
Britain saw its fastest rise in unemployment since 1992 last month, although incomes have risen 3.4 per cent over the last year. The Bank of England has cut its forecast for growth and predicts a "difficult" 2009.
