As the EU continues to struggle with the ongoing migrant crisis and security problems connected with that situation, a new economic report that was recently released shows that economic growth in the EU has halved or declined in major economies throughout the bloc. “Growth stalled in Italy as exports struggle and domestic demand is cooling”, HSBC analyst Fabio Balboni said regarding the EU’s third largest economy.
According to the latest stats available, Italy’s GDP rate was 0.0% down from 0.3% and missing the expectation of 0.2% set out by experts and politicians. The shrinkage in the economy has been caused by numerous problems including the country having the second highest debt in the Euro zone only to Greece which has been in recession since 2010., along with bad governance (mainly corruption) and mafia influence within the country, have all contributed to the economic slowdown.
Italy’s record for growth occurred in 1970 when it’s economy hit 6% GDP expansion. Along with the struggles of the GDP in Italy, the country’s unemployment rate has hit 12.4%, making it one of the highest unemployment rates in the EU, trailing Greece who has a 25.6% unemployment rate, and Spain which has a 22.9% unemployment rate.
In the EU’s second biggest economy, France, the GDP missed its expectation as well with its GDP shrinking or “stalling” to 0.3%.
Problems contributing to the slowdown include a lack of consumer spending and a lack of investment in the country along with the country having a violent summer driving down one of its main economic sources, tourism. France, has been the scene of numerous terror attacks over the last year and a half, escalating especially this summer with a number of high profile attacks around the country.
“We are growing across the board, apart from France which suffered from the strikes, lines of people waiting for petrol and terrorist attacks,” said Georges Plassat who is a chief executive at Carrefour SA. France has seen numerous labor across various sectors of its economy in the last couple of months.
“Right now people who have a choice between traveling to New York or traveling to Paris choose New York because they feel safer” Jean- Jacques Morin said. Mr. Morin is a CFO at Accor Hotels.
In the biggest economy of the EU, Germany, negative growth was reported with 0.4% down 3% from 0.7% in the 1st quarter. The negative growth in the strongest economy is seen as a blow to the prospects of the EU as a whole for the rest of 2016 as Germany has been able to weather a large portion of recession better than most EU countries.
Contributing to the slowdown in Germany includes the financial strain that the migrant crisis has placed on the government, and the Brexit vote which has placed a strain between the two countries. “The decision to leave the EU will hit the British economy and the slowdown will spread through muted exports” said Joerg Zeuner, an economic analyst at KFW bank in Germany.
Germany and the UK are strong trading partners in numerous industries including the automotive field where large numbers of German cars are exported to the Britain. Now with the Brexit vote, trade deals will have to possibly be remade as numerous British politicians who label themselves as “Eurosceptic” have been giving power after the referendum vote.
GDP is important because it is defined as the broad measurement of a nation’s overall economic activity.
In the end, these three countries should put forth a responsible economic plan that will provide a positive example for the smaller EU countries and at the same time help their people financially by providing jobs and economic stability throughout the organization. The EU is afterall supposed to benefit all of Europe by preventing violence and chaos which the continent is infamous for in the 20th century.
Links to Sources:
- Wall Street Journal Link: https://www.wsj.com/articles/french-economic-growth-stalls-1469771132
- Germany GDP Rate: https://www.tradingeconomics.com/germany/gdp-growth
- France GDP Rate: https://www.tradingeconomics.com/france/gdp-growth-annual
- The Globe and Mail: https://www.theglobeandmail.com/report-on-business/economy/euro-zone-economic-growth-slows-in-second-quarter-as-estimated/article31385231/
- The Atlantic Link: https://www.theatlantic.com/business/archive/2011/11/4-reasons-why-italys-economy-is-such-a-disaster/248238/
- The Independent UK: https://www.independent.co.uk/news/business/news/eurozone-gdp-growth-rate-halves-in-second-quarter-a7186886.html
- Reuters Link: https://www.reuters.com/article/us-eurozone-economy-gdp-idUSKCN10N150
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