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TheStreet Open House

Eurozone Recovery Hits Snag In Third Quarter

By PAN PYLAS

LONDON (AP) a¿¿ Three months after it emerged from recession, the 17-country eurozone economy is scarcely growing.

The currency union's economy expanded just 0.1 percent in the July-September quarter compared with the previous three-month period, the EU statistics agency, Eurostat, said Thursday. That was in line with market expectations but below the previous quarter's 0.3 percent increase.

The figure highlights the bloc's struggles to regain economic health despite signs of life in the rest of the global economy, notably in the United States. European government debt, despite years of government cutbacks and tax increases, remains high, unemployment is at a record, and consumers are hesitant to spend.

As a result, few economists think the recovery in the eurozone can pick up a head of steam and become self-sustaining in the way it has in the U.S. In the third quarter, the U.S. grew at an annualized rate of 2.8 percent, compared with the eurozone's annualized rate of about 0.4 percent.

"The drop in the eurozone growth rate does not mean that the eurozone is heading back into recession but it highlights that the recovery is fragile and, as yet, too slow to lead to a significant fall in unemployment," said Marie Diron, senior economic adviser to EY, formerly known as Ernst & Young.

The weak economic backdrop is one reason why the European Central Bank cut its main interest rate last week to a record-low 0.25 percent. The other being low inflation. In the year to October, consumer prices were up only 0.7 percent, way down on the ECB's mandate of keeping inflation just below 2 percent.

Though details were not provided for individual sectors, Thursday's figures show the recovery slowed in the core economies, such as Germany and France, with mild improvements in countries in the so-called periphery, notably in Spain, which saw its nearly two-year recession end.

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