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| Euro Zone Politics Hinder Response as Slump Persists | Euro Zone Politics Hinder Response as Slump Persists |
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| PARIS — Europe slipped deeper into a widespread recession, according to data released Wednesday. But when European heads of state meet next week in Brussels, no big announcements about plans to stimulate growth are expected. | PARIS — Europe slipped deeper into a widespread recession, according to data released Wednesday. But when European heads of state meet next week in Brussels, no big announcements about plans to stimulate growth are expected. |
| As the euro zone economy shrank in the first three months of the year — a record sixth consecutive quarter — economists say the region seems to be in policy paralysis. | |
| With Germany, the Continent’s economic heavyweight, in the grip of pre-election politicking, no big European policy moves are likely until after that country’s elections in September. Even then, it is not clear that anyone has any master strokes planned. | |
| “We don’t see policy makers lifting a finger anywhere in Europe,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said Wednesday. “But this is a depression, rather than a cyclical downturn, and there must be a policy response if things are going to get better.” | “We don’t see policy makers lifting a finger anywhere in Europe,” Carl Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said Wednesday. “But this is a depression, rather than a cyclical downturn, and there must be a policy response if things are going to get better.” |
| While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data on Wednesday from Eurostat, the European Union’s statistical agency. The French president, François Hollande, observed the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism. | While Germany was able to barely sidestep a recession in the first quarter, France slid into one, according to the data on Wednesday from Eurostat, the European Union’s statistical agency. The French president, François Hollande, observed the occasion at a news conference in Brussels by indicating that his country should not be singled out for criticism. |
| “Are we an isolated case?” Mr. Hollande said of France. “No, because the recession in Europe and particularly in the euro zone is greater.” But he offered no prescriptions for growth other than to say, “If Europe, member states and France organize ourselves to promote growth, then we can return to the hope of a better future.” | “Are we an isolated case?” Mr. Hollande said of France. “No, because the recession in Europe and particularly in the euro zone is greater.” But he offered no prescriptions for growth other than to say, “If Europe, member states and France organize ourselves to promote growth, then we can return to the hope of a better future.” |
| Organizing to promote growth, though, seems to be the mission that has long eluded the European Union, whose listlessness contrasts with the performance of other major global economies. | Organizing to promote growth, though, seems to be the mission that has long eluded the European Union, whose listlessness contrasts with the performance of other major global economies. |
| Two weeks ago, the European Central Bank cut its benchmark interest rate target to a record low in a move that was largely symbolic, but it gave no hint of whether it had any additional measures in store. Economists say there is a limit to what monetary policy can accomplish, in any case. | |
| And the people perhaps most able to propose action — European Union finance ministers — just spent two days in Brussels arguing over tax havens and debating a banking union, which is aimed at avoiding future disasters, not reviving growth. | And the people perhaps most able to propose action — European Union finance ministers — just spent two days in Brussels arguing over tax havens and debating a banking union, which is aimed at avoiding future disasters, not reviving growth. |
| “The political situation in Europe is not conducive to making bazooka decisions,” said Gilles Moëc, an economist at Deutsche Bank in London, referring to an allusion by Henry M. Paulson Jr., a former United States Treasury secretary, to the need to have economic firepower in a crisis. “No one’s talking about creating any further jolts to the system.” | “The political situation in Europe is not conducive to making bazooka decisions,” said Gilles Moëc, an economist at Deutsche Bank in London, referring to an allusion by Henry M. Paulson Jr., a former United States Treasury secretary, to the need to have economic firepower in a crisis. “No one’s talking about creating any further jolts to the system.” |
| The 17-nation euro zone economy contracted 0.2 percent in the first quarter from the last three months of 2012, Eurostat reported Wednesday. That was less than the 0.6 percent decline recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent decline. | |
| France experienced a second consecutive quarter of contraction, the widely accepted definition of a recession, of 0.2 percent. Germany essentially marked time, with growth of only 0.1 percent. The economy of the overall union, made up of 27 nations, shrank 0.1 percent. | France experienced a second consecutive quarter of contraction, the widely accepted definition of a recession, of 0.2 percent. Germany essentially marked time, with growth of only 0.1 percent. The economy of the overall union, made up of 27 nations, shrank 0.1 percent. |
| Eurostat said it was the first time the euro zone had contracted for six consecutive quarters since the creation of the single currency in 1999. | Eurostat said it was the first time the euro zone had contracted for six consecutive quarters since the creation of the single currency in 1999. |
| In annualized terms, the euro zone economy contracted about 0.8 percent in the first quarter. That is in stark contrast to the current 2.5 percent annual growth rate in the world’s largest economy, the United States. China, with the second-biggest economy, reported in April first-quarter growth of 7.7 percent. | In annualized terms, the euro zone economy contracted about 0.8 percent in the first quarter. That is in stark contrast to the current 2.5 percent annual growth rate in the world’s largest economy, the United States. China, with the second-biggest economy, reported in April first-quarter growth of 7.7 percent. |
| Japan, with the third-largest economy, is expected to post annualized growth of about 2.8 percent when it reports its first-quarter numbers on Thursday. | Japan, with the third-largest economy, is expected to post annualized growth of about 2.8 percent when it reports its first-quarter numbers on Thursday. |
| Europe’s economic doldrums are by no means the region’s problem alone. Despite its troubles, the European Union remains the world’s single largest market, which means its weakness is retarding growth in the rest of the world. | Europe’s economic doldrums are by no means the region’s problem alone. Despite its troubles, the European Union remains the world’s single largest market, which means its weakness is retarding growth in the rest of the world. |
| Moody’s Investors Service warned in a report on Wednesday that the weakness in the euro zone, combined with the mandatory budget cuts in the United States, would weigh on the world economy. Those factors will help limit growth in the Group of 20 industrial nations to just 1.2 percent this year, Moody’s said. | Moody’s Investors Service warned in a report on Wednesday that the weakness in the euro zone, combined with the mandatory budget cuts in the United States, would weigh on the world economy. Those factors will help limit growth in the Group of 20 industrial nations to just 1.2 percent this year, Moody’s said. |
| The fixation on debt and deficits in Europe created a de facto euro zone policy of austerity budgets. The richer countries of Northern Europe promoted those policies until only recently — even as the real economy was shrinking and unemployment in the euro zone was reaching its current record level of 12.1 percent. | The fixation on debt and deficits in Europe created a de facto euro zone policy of austerity budgets. The richer countries of Northern Europe promoted those policies until only recently — even as the real economy was shrinking and unemployment in the euro zone was reaching its current record level of 12.1 percent. |
| Mr. Moëc of Deutsche Bank said low consumer demand, tight lending policies by a banking sector that is trying to shrink and corporate layoffs were are contributing to the decline. For most of Europe, Mr. Moëc said, “It’s a perfect combination of nasty headwinds.” | |
| Philippe d’Arvisenet, global head of economic research at BNP Paribas, estimated that the euro zone economy would shrink about 0.5 percent this year, after a 0.6 percent contraction last year. Growth will probably return in 2014, he said, “but probably below 1.0 percent.” | Philippe d’Arvisenet, global head of economic research at BNP Paribas, estimated that the euro zone economy would shrink about 0.5 percent this year, after a 0.6 percent contraction last year. Growth will probably return in 2014, he said, “but probably below 1.0 percent.” |
| Mr. Moëc said the only bright spots came from the fact that much of the pain of austerity had already been felt. A further decline in the value of the euro, which has fallen about 5 percent against the dollar since its recent peak in February, might also help, he noted, by making European companies’ overseas sales more profitable. | Mr. Moëc said the only bright spots came from the fact that much of the pain of austerity had already been felt. A further decline in the value of the euro, which has fallen about 5 percent against the dollar since its recent peak in February, might also help, he noted, by making European companies’ overseas sales more profitable. |
| Mr. Weinberg, in New York, said that any impetus for change would have to come from Germany, because its budget surplus gave it the room to maneuver. But, with elections looming, he was pessimistic about action anytime soon. | |
| “I don’t know how to cook a story with a happy ending from the current policy settings,” Mr. Weinberg said. | “I don’t know how to cook a story with a happy ending from the current policy settings,” Mr. Weinberg said. |
James Kanter contributed reporting from Brussels. | James Kanter contributed reporting from Brussels. |