World Bulletin / News Desk
Strong exports limited the euro zone's economic contraction in the second quarter of this year despite falling investment, inventories and private consumption that point to output shrinking overall in 2012.
The EU's statistics office Eurostat confirmed on Thursday that gross domestic product in the 17 countries using the euro fell 0.2 percent quarter-on-quarter. It revised the year-on-year fall to 0.5 percent from a previously reported 0.4 percent.
The debt crisis that began in Greece nearly three years ago has crushed Europe's efforts at recovery from the 2008/2009 global financial crisis, probably sending the bloc into recession for the second time in just three years.
"Weakness is the name of the game," said Joost Beaumont, a senior economist at ABN AMRO in Amsterdam. "We see another contraction in the third quarter because domestic demand will be hit by fiscal consolidation, rising unemployment, tight credit conditions and the high uncertainty of the euro zone crisis."
The euro zone would already be in a technical recession, were it not for flat output in the first three months of the year, after a 0.3 percent quarterly contraction in the last quarter of 2011.
Eurostat said a fall in household consumption subtracted 0.1 percentage point from the final quarterly GDP figure and shrinking investment and inventories took away 0.2 percentage points each, compared with the previous three months.
Strong exports, however, added 0.6 percentage point which, after the negative contribution of imports, left the net result from trade at a positive 0.2 percentage point.
With the Chinese economy slowing and the U.S. economy struggling to build a solid recovery, the euro zone cannot rely on exports to pull it out of the downturn, however.
"Leading indicators continue to point, in broad terms, to more of the same in the third quarter, though with a risk of the external sector softening in line with recent evidence of weakness in manufacturing activity globally," Ken Wattret, a euro zone economist at BNP Paribas, wrote in a note to clients.
Most economists see the euro zone, which generates 16 percent of global economic output, shrinking by at least 0.3 percent this year. A recovery may only come in mid-2013.
In its latest assessment, the Paris-based organisation for Economic Cooperation and Development said on Thursday that Europe's problems were also "dampening global confidence, weakening trade and employment and slowing economic growth".
NO SUPPORT FROM SHOPPERS
The euro zone's biggest hurdle is that Europeans' ability to spend and drive a recovery has been devastated by government lay offs, budget cuts, record joblessness and stubbornly high inflation pushed up by world oil prices.
Data showing a fall in retail sales in July and a contraction in the euro zone's service sector in August, both released on Wednesday, showed the extent of the weakness.
Recession is already a reality for much of southern Europe while Germany and France, the bloc's two largest economies, are starting to feel the malaise as Spaniards and Italians buy fewer of their products.
GDP contracted in Belgium and Finland and stagnated in France, as the problems of the indebted Mediterranean weigh.
"The core is no longer immune to the euro zone crisis," ABN AMRO's Beaumont said.
Retail sales fell sharply in Germany in July and confidence among European consumers fell to a 38-month low in August, which bodes poorly because just over half of the euro zone's economy is generated by domestic spending.
Led by France, EU leaders agreed at a summit in June to inject 120 billion euros ($151 billion) into the European economy to counterbalance public sector layoffs and cuts in spending to bring budget deficits down to sustainable levels.
The European Central Bank cut interest rates to a record low of 0.75 percent in July to cut the cost of borrowing for families and businesses, but neither the bank's move nor the EU's "growth pact" is likely to overcome the downturn.
Investors are instead focused on a policy meeting later on Thursday where the ECB is expected to outline new tactics to cut high borrowing costs for indebted Spain and Italy.
Although the likely consumer is Europe, which would require pipelines to pass through Turkey, companies may decide instead to export gas from the Levant basin to Jordan, Egypt or the Asian continent.
The ambassadors did agree to add more people and entities to the EU's asset freeze list, using expanded criteria including Russian companies that help to undermine Ukraine's sovereignty
Washington has pressured companies and governments not to buy crude from the Kurdish Regional Government (KRG), but it has stopped short of banning U.S. firms from buying it outright.
The whistleblower's email said GSK used its own employees and Syrian distributor Maatouk Group to make illicit payments.
The hackers broke into a database storing details of people who had registered for ECB conferences, visits and other events, the bank said.
Russia generated $356 billion from oil, gas exports last year, data shows.
While stopping far short of targeting physical energy supplies, EU ministers for the first time this week raised the idea of restricting Russian access to oil and gas technology.
They were among nine organisations and three people added to the EU's Syria sanctions list, published in the bloc's Official Journal
Land reform remains a sensitive issue in South Africa, where 20 years after the end of apartheid the white minority still holds around 87 percent of commercial farm land.
Talks are reportedly underway for a number of investment projects, including in pharmaceuticals and automotive assembly, but no final investment agreements are expected this week.
The yuan will be the world's third largest currency after the U.S. dollar and euro, a Chinese report predicts.
Unemployment currently stands at 12.7 percent in Kenya and affects 30 percent of the country's population
GM so far this year has recalled about 14.7 million vehicles worldwide with switch-related issues and has linked at least 16 deaths to those issues.
The deal includes hydropower and nuclear power plants in the South American country.
State-run think tank Korea Institute for Defense Analyses (KIDA) reported earlier this month that a twin-engine version of the fighter jet is expected to cost around 8.5 trillion won
Western officials have repeatedly warned Iranian counterparts over the past six months that more economic pain is a risk for an OPEC member whose oil exports have already shrunk to a fraction of what they could have been