Nobody's told them yet, but things might just be getting better.
Photograph by Aris Messinis — AFP/Getty Images
By Geoffrey Smith
November 14, 2014

The Eurozone hasn’t been a happy place this summer: France has sacked its government, Spain’s is engulfed in corruption scandals, Italy is still trying to escape a vortex of debt deflation–and Germany is so concerned about the Ukraine crisis that it can’t remember that things at home are actually pretty good.

So it’s something of a surprise to see Eurostat announcing on Friday that the 18-country currency bloc actually eked out growth of 0.2% in the third quarter, leaving it up 0.8% from a year ago.

That’s still a long way short of the U.S.’s annual rate of 2.3%, or the U.K.’s 3.0%, but it’s still not the recession that has seemed to be just round the corner all year.

The statistics show that only Italy out of the major European economies contracted (by 0.1%) during the summer, while France and Germany, which account for around a half of the bloc’s output between them, grew by 0.3% and 0.1%. France’s performance was admittedly not as strong as it seemed, given that 2Q data were revised down and the 3Q data depended on a boost in government spending that will be hard to keep up in the face of pressure from Brussels to cut its budget deficit.)

More eye-catching is the fact that Greece, Spain and Portugal, all of which took high-profile bailouts in the last four years, are all doing better than the Eurozone “core” these days: gross domestic product was up 1.6% on the year in Spain, 1.4% in Greece and 1.0% in Portugal. Ireland, the other major bailout recipient didn’t report figures Friday but has been the strongest growing economy in the Eurozone for both of the previous two quarters and is expected to stay that way.

The EU's 3Q growth map. Source: Berenberg Bank

The other eye-catching part of the numbers is that countries in central and eastern Europe are still among the fastest growing in the E.U., despite the widespread perception that they are more exposed to the fallout from Ukraine than countries further west. Romania’s economy grew 1.9% in the quarter, Hungary and Bulgaria added 0.5% each (the latter despite a banking crisis) and Poland gained 0.9% even though it was the biggest victim of Russia’s embargo on imports of E.U. fruit and vegetables.

The figures don’t at first sight appear weak enough to push the European Central Bank into another big move to stimulate the economy. The E.C.B. still expects a modest recovery next year, although it warned again Thursday that the risks to that forecast are biased to the downside, thanks largely to the poisonous effect of the Ukraine conflict on confidence.

But that doesn’t mean the E.C.B. has ruled out easing further. Christian Noyer, the Governor of the Bank of France, said in an interview with the French newspaper Les Echos Friday that “if we see that our current policy isn’t having an effect any more…I don’t see any problem with the E.C.B. buying other assets and, if necessary, government bonds.”

Financial markets were underwhelmed with the figures, sending the euro down 0.2% against the dollar, and the EuroStoxx 600 index down 0.3%.

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