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Good news for traders across the Euro-zone is that the recession has now ended. But is it time to rejoice?
Bonn – 20.08.2013 – Traders and people all over Europe may take a sigh of relief with the knowledge that the recession that hit the European economies hard has now come to an end.
While the end of recession is likely to have positive impact on the commercial houses and their business, it is too early to rejoice. Though the recession has reportedly come to an end, its impact may still affect trade and commerce in Europe.
Latest reports of the European Economic Commission reveal that the Euro-zone is slowly coming out of the clutch of the recession that held it firmly for the last few years. According to the report the 2nd quarter growth of the Euro-zone economy registered 0.3% growth. While the growth rate is lower than the individual economic growth rates registered by both United States and United Kingdom, it is much better in comparison to the negative growth rates that were registered in respect of Euro-zones for the last couple of years.
According to Olli Rehn, the Commissioner of economic and financial affairs in European Commission; “this timid recovery vindicates the budgetary austerity strategy imposed on the members of euro-zone since the start of the sovereign debt crisis.”
Economic experts that supported austerity measures in Europe feel proud that such measures were mainly responsible for the financial recovery registered by the zone in the recent months. They also feel grateful to Olli Rehn for devising the strategy of such austerity measures to take out the euro-zone from recession.
Other economists feel, and it seems rightly so; that it would be too early to rejoice. They also do not agree that the recovery from recession was triggered by the austerity measures introduced. Reason for this is that in recent months the European Commission relaxed many austerity measures in different countries coming under euro-zone. This indicates that the austerity measures did not yield the results they were aimed at and at the same time the recovery process was expedited after relaxation of these measures.
In fact; with such relaxations, countries like France were able to sustain economic activity though feebly and with their success other countries followed suit. Only exceptions were Netherlands and Italy that stuck to austerity measures and interestingly, these are the two countries that have not come out of recession as yet.
As Paul De Grawe who is the Head of the European Institute of London School of economics says; “the view that fiscal discipline is the cause of the recovery is extraordinary, even surreal. It is like a thug who has beaten up his victim. After he has stopped the beating, the victim regains consciousness. That’s when the thug says to his victim that he should be grateful, because the beating has made him stronger and allowed him to recover.”
Major concern for everyone is how sustainable the economic recovery from recession would be in case of the euro-zone. Two things may come in the way. First of the situation will come into play if the European Economic Commission decides to impose the austerity measures all over again. Secondly; the growing split between the northern and southern parts of euro-zone could further endanger the process of recovery.
Economies looking to recover fast have to be careful about both these possibilities.