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 PIB, attention à la chute

by Clotilde Mathieu

GDP Bounces Back, But Watch Out for the Fall

Translated Monday 2 September 2013, by Gene Zbikowski

The recession has officially come to an end in France, Germany, and more generally in Europe. But for the economists this does not mean a return to economic growth.

A 0.3% rise in the euro zone, 0.5% in France, 0.7% in Germany, and 1.1% in Portugal. This was all European leaders needed to proclaim a return to economic growth. The French president moreover did not even wait for the French statistical bureau to publish its figures on August 14 to promise the French that the wind had changed direction thanks to the reforms that had been undertaken. French prime minister Jean-Marc Ayrault, for his part, did not hold back either: “Don’t think that the good figures in the second quarter are due to chance – they result from the capacities of our economy, from our means of production, from our policy and from the new orientation adopted by Europe.”

This optimism brings to mind that of a certain Christine Lagarde, then minister of the economy under Nicolas Sarkozy. France, then struck by the most serious recession since the Second World War, enjoyed 0.3% growth in the second quarter of 2009. “After four quarters of negative growth,” the French economy had “come out of the red,” she announced, thanks notably to the tax exemptions that would allow “millions of French people to benefit from a little more purchasing power.” The rest, unfortunately, is history…

One might have thought that, with François Hollande, realism would get the upper hand, all the more so as the 0.5% growth mainly rests on 0.4% growth in household consumption … which is partly linked to bad weather, the lousy spring having made energy bills balloon. Growth without jobs or investment: France continued to destroy jobs – 27,800 in the same period, as against 8,300 in the preceding quarter. The government has not commented on that figure. According to Eric Heyer, an economist at the French institute for the economic situation, “lasting economic recovery can only come if there is investment. Today, there isn’t any.” Investment has indeed continued to fall, even though it is at a slower rate (a 0.5% drop in the second quarter, as against a 1% drop in the first quarter).

An adjustment effect following a harsh winter

The same persuasive efforts are being made in Germany. With 0.7% growth, that is, 0.1% more than expected, and five weeks before the parliamentary elections, the German minister of the economy jumped at the opportunity. “Germans have every reason to be optimistic as to the future,” said Philipp Rösler. “We must continue on the same path that, until now, has brought success: solid finances, competitive companies, and a policy that opens up margin for maneuver,” tax breaks, the pet subject of his liberal party (FDP).

With all due respect to the minister and to German chancellor Angela Merkel, here again, the extent of the bounce back seems to be linked to unusual climate conditions and to the housing bubble, prices having rocketed by 10% since 2000 according to the minister of the economy. While the details of this growth will not be known before August 23, these springlike figures are partly to be explained by an adjustment effect, notably in the building trades, which had been sluggish for months due to a harsh winter. Moreover, the minister has not revised his 0.5% growth prediction for 2013 as a whole.

Countries that remain in the red.

According to Eurostat, the gross domestic product (GDP) of the 27 EU countries grew by 0.3% compared to the first quarter, a figure that is slightly better than the 0.2% growth expected by the economists. But four countries are mainly concerned by this recovery: France and Germany on the one hand, Finland and Portugal on the other. On the flip side, Italy, Spain, Greece and the Netherlands are still in recession. But this is enough for the European Commission’s propaganda: “A lasting recovery is now within reach, but only if we continue our response to the economic crisis on all fronts,” insisted the European commissioner on economic affairs, Olli Rehn, in his blog.

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