None of the large European economies, except Germany, was able to return to production levels before the financial crisis triggered in 2008 in the United States, it looks like the old continent lost decade, with lasting effects on population. Data presented on Tuesday by Eurostat show that EU GDP in the second quarter decreased by 0.2% comparing to the first three months of the year, a decline similar to that in the euro area, with negative trends in most states, especially in the south, New York Times reports.
The trend suggests that Europe’s economy may face a lost decade, a period of stagnation harmful and lost potential that could have lasting effects on ordinary citizens, considers American economists Peter Rupert and Thomas F. Cooley. Unrealized economic growth means investment in education that was not done, unfunded research, failed businesses and careers ended too early.
“There are larger implications that people are not thinking of. There is a huge decline in human capital,” said Rupert, professor of economics at the University of California, Santa Barbara. The border line between the beginning and the end of a recession is not easy to define. A common definition of recession is the decline in production for two consecutive quarters. Technically, the euro area economy is in recession, as it stalled in the first quarter.
But most economists agree that the recession is defined by other indicators such as unemployment, industrial production and investment. According to the Centre for Economic Policy Research in London, the euro area was out of recession after the second quarter of 2009, when the economy in the region returned to growth. The institute has not yet examined whether the euro area is back in recession, but few can argue that Europe, hit by sovereign debt crisis that began in 2010, enjoyed prosperity in recent years.
Only Germany is richer than in the first quarter of 2008, France is close to that level, according to Rupert and Cooley, the latter a professor at the Leonard N. Stern School of Business at New York University. Spain and Italy have returned to the black period of 2009 after the collapse of Lehman Brothers triggered a financial crisis that has undermined the global economy. Both countries have returned to growth in 2009, but have stalled mid last year. Since then, Spain has gone through three quarters of GDP declining, while Italy’s economy has been shrinking for a year.
There is no doubt that the two countries are in recession, and some analysts expect that it’s Germany’s turn now. On the other hand, the United States have recovered the lost ground from 2008 at the end of 2011, but it needed a period of time two times longer than in other recessions produced after World War II, according to the two economists.
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