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Germany leads EU downwards

GDP fell by 2.5% in both the euro area and the whole of the EU27 during the first quarter of 2009, according to flash estimates produced by Eurostat, the statistical office of the European Communities. In the final quarter of 2008 growth rates were -1.6% in the euro area and -1.5% in the EU27.

 

When we compare the first quarter of 2009 with the same quarter in the previous year, GDP decreased by 4.6% in the euro area and by 4.4% in the EU as a whole. These figures were somewhat surprising as analysts had been predicting a fall of only about 2.0% in the eurozone area. However, a continuing sharp fall in German export sales led to a fall in German GDP of 3.8% in the first quarter, and a fall of 6.9% year-on-year.

 

A consequence of this is that Germany will suffer its biggest post war budget deficit this year as tax revenues continue to fall at an alarming rate. In fact, the German finance minister has just stated that the federal deficit will be above €50bn this year and will rise to €90bn next year. This compares with a federal deficit in 2008 of only €11.9bn. Germany expects its economy to shrink by 6% this year which will be the largest fall since the Great Depression in the 1930s.

 

The Baltic States are being particularly badly hit by the credit crisis. Eurostat statistics show that GDP in Estonia fell by 6.5% in the first quarter of 2009 (giving a year-on-year fall of 15.6%) whilst Lithuania fell by 9.5% (10.9%) and Latvia decreased by 11.2% (18.6%).

 

Amongst the other major EU countries France saw its GDP fall by only 1.2% in the first quarter, with Italy recording a fall of 2.4%. By contrast the UK declined by 1.9%.

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Posted in European Union, eurozone, GDP, recession

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