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EU The Almighty Buck

Is Europe's Recession Really Over? 159

jones_supa writes "Bloomberg, the WSJ and the NYT cheered to report that the Euro Zone's economy has showed signs of recovery after two years of decline. They're all based on the news that Eurostat, the keeper of economic statistics for the European Union, says GDP grew 0.3 percent within the EU's borders from the end of March through June. As Olli Rehn, Eurostat's vice president, writes on his blog: 'I hope there will be no premature, self-congratulatory statements suggesting "the crisis is over."' He calls the GDP report only another sign of 'a potential turning point in the EU economy.' The quick conclusion by some economists and some in the news media that a slight rise in one quarter's GDP means a recession is over ignores how experts figure out when an economy is either in a significant downturn (a recession) or enjoying steady growth (an expansion)."
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Is Europe's Recession Really Over?

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  • by gwjgwj ( 727408 ) on Wednesday August 14, 2013 @04:36PM (#44568111)
    • by jlar ( 584848 )
      It ain't over till the fat lady sings...
    • by Anonymous Coward

      and throwing the Economist's bone's, killing a chicken, and skaking the Magic Eight Ball: []

      Question: what will the European economy do?

      "My sources say no"

      Which is much more informative than Alan Greenspan EVER was.

    • You beat me to it. But basically, you're right. The sad thing is, in this case, a simple statement of negation would have sufficed for a headline.

    • by ShanghaiBill ( 739463 ) on Wednesday August 14, 2013 @05:39PM (#44568587)


      Actually, yes, in this case. People tend to think that "recession" has a fuzzy definition, and means bad economic times, or high numbers of jobless. It doesn't. Recession means two or more consecutive quarters of economic contraction. Period. A recession is not "over" when you get back to the previous levels of income and employment. It is over when you hit bottom and start to recover.

      • Problem is, a single growing quarter doesn't mean we've hit rock bottom. So, yes, technically this recession may be over, but that doesn't mean we won't have a new one half a year from now.


        Depends which dictionary you are consulting.

        Definition #3 is, perhaps, what the general public is running with:
        3: a period of reduced economic activity

      • Doesn't mean they won't revise the number 6 months from now. I'll go with the pesimistic ``NONE of the problems have been resolved... so... why the optimism?''

      • No.

        Actually, yes, in this case. People tend to think that "recession" has a fuzzy definition, and means bad economic times, or high numbers of jobless. It doesn't. Recession means two or more consecutive quarters of economic contraction. Period. A recession is not "over" when you get back to the previous levels of income and employment. It is over when you hit bottom and start to recover.

        That's a major problem. The governments and news organizations use the term "recession" based on numbers. The general populace uses the term "recession" based on pain. As far as they're concerned, being financially restrained because of suppressed wages or worries about job stability means "recession" a lot more than the level of the Dow or T-Bill rates.

        The Greenspans and Bernankes don't get this. They've got high-paying civil service jobs which are still going to be there, recession or not. Political dema

    • by Windwraith ( 932426 ) on Wednesday August 14, 2013 @05:52PM (#44568695)

      Being from Spain, this guy is right. The answer is a simple "no". I am giving zero craps about the wellbeing of the EU as a thing, but I can't take any more tax raises and salary cuts as we are. A new tax raise AND salary cut for all is coming soon. So yeah, the recession is here to stay.

      • by gmack ( 197796 )

        Spain's problem is that the regulatory system makes it very hard to do business. I don't see how they expect to improve their economy while the bureaucracy actively fights anyone trying to make money or pay people.

        • Spain's problem is southern Europe's problem is corruption.
          The state collects taxes, half of the money disappears into deep pockets, there is not enough money to pay for investments in infrastructure and social security, so social security is slashed, investments go down, taxes are raised... repeat.

          Corruption is one of the greatest scourges in the world. Greedy, selfish and ambitious people, the scum of Earth.

    • No.

      There's a slight complication here, in that *if* this is a case of Betteridge rather than a legitimate question, then the answer the headline is implying is already "no". It's not "Is Europe's recession over?", it's "Is Europe's recession *really* over?" (as in, other people have already said that and *this* is the note of doubt implying a "no").

      In this case, then, *if* one assumes this is a case where Betteridge is relevant, then, the "correct" answer should be "yes"!

      Of course, Betteridge only applies

    • Not if they cooked-the-books the same way the Obama administration did here in USA. This quarter they included art, music, and poetry for the first time. I'm going to cook me up a big meal of contemporary sculpture for dinner.
  • by Anonymous Coward on Wednesday August 14, 2013 @04:43PM (#44568165)

    A recession is defined as two consecutive quarters of negative growth. Thus, the recession is technically over.
    Which doesn't mean it can't come back later.

    • by bill_mcgonigle ( 4333 ) * on Wednesday August 14, 2013 @04:48PM (#44568213) Homepage Journal

      Thus, the recession is technically over.

      Technically, the growth needs to be measured in concert with actual monetary inflation. I don't know what the status is in the EU, but in the US, they *never* do that on state-controlled media.

      More important is what the unemployment levels are like vs. historical norms. For instance, in the US, we'd need 3.5% growth for ten consecutive years to reach pre-2000 levels of employment. That level of growth was never achieved in the 20th century.

      As I understand it, Spain, for example, is in much worse shape than the US in terms of employment.

      Official numbers rarely reflect the condition of the common man.

    • by tlambert ( 566799 ) on Wednesday August 14, 2013 @05:08PM (#44568371)

      A recession is defined as two consecutive quarters of negative growth. Thus, the recession is technically over.

      Which doesn't mean it can't come back later.

      "A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his."
      -- Ronald Wilson Reagan

    • Of course, when you're out of the recession but aren't recovering, it doesn't mean much.
    • A recession is defined as two consecutive quarters of negative growth. Thus, the recession is technically over.

      Which doesn't mean it can't come back later.

      It seems to me that if you need two consecutive quarters of negative growth to call it recession, you should also need two consecutive quarters of positive growth to call it an expansion or recovery

      One quarter of weak growth doesn't really tell you anything.

    • A recession is defined as two consecutive quarters of negative growth. Thus, the recession is technically over.

      This definition is fundamentally flawed. Under this, it is technically possible for an economy to decline indefinitely which never actually entering a recession. GDP change from quarter to quarter could progress like so

      -2.0%, +0.1%, -2.0%, +0.1%, -2.0%, +0.1%, -2.0%, +0.1%, .....

      Which works out at a -3.7% decline every year, but still technically no recession. This is what we refer to in the mathematical business as "absurd".

      Unfortunately, this appears to be exactly how the political class across the Eurozone appears to doing. The continent is slowly imploding, but event one 0.1% quarter of growth is taken as proof that "The recession is over". The way the modern world is going, I'm really beginning to understand exactly how the Soviet Union operated on a political level.

      • Which is why there are other terms in use than just 'recession'. A recession is a reasonably short term description. Medium and longer term descriptions such as stagnation and depression exist too.

        It is useful to have precise language available so we can communicate precisely. If everyone understands the recession = 2 quarters of GDP decline then we know where we are and can analyse patterns over time.

        I think the solution is to remember that 'recession' has a technical definition, rather than a coloquial on

        • by chihowa ( 366380 )

          It still seems pretty absurd, though. Especially since it's being pitched about to laymen all of the time. It's a very specific and arbitrary definition, and as OMF points out, the utility of it is questionable at best.

          Why not an average of the last two quarters (or three quarters)? Or the trend of a rolling average across several years. That would address the example described above. There are many other different metrics that you could use that would actually have analytical utility. That we choose this o

    • Unless the Europeans are a hell of a lot better at determining these numbers then we are, they are sure to be revised. More than once. There is no guarantee that 5 years from now 2nd quarter 2013 EU GDP will still be positive. For instance US fourth quarter 2012 GDP was initially -0.1%, revised to +0.1%, revised to +0.4%.

  • by Anonymous Coward

    ... cannot recover. That's what debt is - a promise to work harder later than you work now. In the case of large public debt, it's a promise to force your children to work harder than you do.

    • This AC is completely wrong. All public debts are matched by an equal private asset. "Paying off" public debt consists of asset swaps between reserve accounts and securities accounts held at the Federal Reserve. There will never be a need to levy higher taxes to conduct such swaps, let alone a need for private individuals to "work harder."

      • This AC is completely wrong. All public debts are matched by an equal private asset. "Paying off" public debt consists of asset swaps between reserve accounts and securities accounts held at the Federal Reserve. There will never be a need to levy higher taxes to conduct such swaps, let alone a need for private individuals to "work harder."

        If this were true, there'd be no real problem with the Federal Reserve buying up all the Public Debt in the USA, and then doing so again whenever more money is needed (nex

        • If this were true, there'd be no real problem with the Federal Reserve buying up all the Public Debt in the USA, and then doing so again whenever more money is needed (next month, and every month after, basically).

          Reserves and Securities are both highly liquid, interest-bearing public debts. The point is that if you trade one for another the only difference is the interest rate (currently ~3% for securities and 0.25% for reserves). If the Fed literally bought all of securities, the private sector would have less money in the long run due to a lower average interest rate.

          Hell, they could abolish income taxes and corporate taxes too, while they're at it.

          It is absolutely a fact that taxes (and bond sales) do not operationally fund the federal government's expenditures. In that sense they could be abol

  • by Hatta ( 162192 ) on Wednesday August 14, 2013 @04:48PM (#44568209) Journal

    Notice how economic indicators never come with measures of uncertainty. It's always "we added 100,000 jobs this month". You'll never hear "we added 100,000 +/- 50,000 jobs". Yet another reason why economics is not a real science.

  • by Trepidity ( 597 ) <> on Wednesday August 14, 2013 @04:49PM (#44568215)

    The EU is getting more integrated, but is still nowhere near one economy that moves in unison. So the answer to the headline question is: yes in some places, no in others. Germany's GDP is growing; Spain's is shrinking.

    • And as a German-born American, I certainly hope the EU never moves economically in unison, since the only way to get that to happen is to basically destroy every shred of autonomy for the member nations.

      • by Trepidity ( 597 )

        It would be better if there were at least more labor-market mobility. Countries could still run their own domestic economies, but someone who didn't like the economic policies of country A could just move to country B and choose theirs instead.

        That is legally possible today but in practice done much less than e.g. state-to-state movement in the U.S., for many reasons. Some of them are legal barriers to recognizing credentials, although those are slowly being harmonized (e.g. medical licenses are now harmoni

      • by Teun ( 17872 )
        I care little (non-zero!) about the autonomy of my city, province or country providing it is replaced by the autonomy of a larger entity like a democratic Europe.
        Both professionally and privately I travel a lot and I see the European project as a great chance for it's people, a much better chance for peace and prosperity than the individual nations can ever give.

        The economic problems in many of the EU countries are not a lack of funds but individuals, companies and banks refusing to spend it.
        There is ple

    • Some economies where never shrinking much in the first place. So if you are talking about EU recession you are talking EU numbers.

    • Not many economies are integrated in the way you're thinking. Try looking at the economic data for London versus Yorkshire and see how often the two have moved in unison for any sustained period of time.

      In most economies it is accepted fact that some areas will boom while others don't, and that the two will cross-subsidise and even each other out. The EU's problem isn't that the nations aren't in synch, it's that there isn't that level of acceptance of cross subsidisation yet. We still have a situation wher

  • Watch Germany (Score:5, Insightful)

    by RogueyWon ( 735973 ) on Wednesday August 14, 2013 @04:49PM (#44568227) Journal

    Specifically, German manufacturing...

    That sector benefited over the years between the start of European Monetary Union and the start of the Mediterranean death-spiral from being locked into a favourable exchange rate with a relatively cash-rich (albeit debt-fuelled) set of customer states. Most of those states are economically dead or dying at the moment.

    If the German manufacturing sector has managed to diversify its markets enough over the last couple of years that it can weather the delayed shock of this when it finally hits, then Europe will probably muddle through. Once the worst of the crisis has past, the states that should never have been in EMU to begin with can be eased out of it without too much risk of contagion and most of Europe will be ok (though I suspect living standards in Greece etc will take decades to make up lost ground, if indeed they ever do).

    If German manufacturing does start to suffer in a big way over the next year or two, then we've only seen the start of the problem, as if the economic engine of much of the continent splutters, then the death spiral will just widen. In that case, expect to see the UK and some of Eastern European states split away in self preservation and some really unpleasant social disorder sweep most of the rest of the continent.

    All of which is absolutely nothing compared to what will happen when China's generation of largely-single angry-young-men-used-to-ever-rising-living-standards (the inevitable result of a one-child-policy that turns a blind eye to a bit of back-door gender selection) experiences its first serious recession.

    • by Anonymous Coward

      The UK isn't in what you're calling the European Monetary Union, so it can hardly "split away", and UK funds cannot legally be used directly and immediately to fund Eurozone bailouts. UK funds *can* be used in supporting loans and in direct aid to EU members (and hence Eurozone members) so it's not that the UK won't be supporting struggling Eurozone economies, but it is not directly tied to it beyond the fact that the collapse of the UK's largest trading market would be ruinous for the UK economy.

    • The German economy is a ticking time bomb due to sub replacement birth rates and a unaccommodating immigration policy coupled with negative attitudes towards Muslim immigrants.

      It's also well-known that Germany's long term care system is unsustainable due to the demographic problem.

      A recent census shocked German politicians when it showed a population 1.5 millions smaller than expected. []

  • by Kjella ( 173770 ) on Wednesday August 14, 2013 @05:08PM (#44568373) Homepage

    People can weather bad times for a while, many have nest eggs, live off ramen noodles and stay with their parents longer, don't start a family, take more education instead and whatnot to live a subsistence life but those options tend to run out and eventually what they desperately need is a job and an income so they can get on with their lives. That the economy isn't tanking even more is great, but unless there's real growth and people getting back into the labor force it's still going to be a train wreck in progress. The same is happening in the US, before the financial crisis the employment-population ratio was about 63% now it's hovering between 58% and 59%, despite what the unemployment rate says. The US would need another 10 million jobs to return to 2008 levels.

    So far I must say that despite everything it has been very calm so far, when you're looking at 27.6% unemployment and 64.9% youth unemployment like Greece does right now many countries would be at "fuck it, communism can't get any worse" conditions. And fat fucking luck if you're going to get a job after years of unemployment, most places will see you as damaged goods and rather hire someone straight out of school. The economy is one thing, it will survive somehow but the people are getting royally screwed. It's a generation almost certain to have it much worse than their parents, despite all the technological advances. And somehow I have the feeling it's just one bad domino away from becoming something much worse, so many look ready to fall.

  • by reve_etrange ( 2377702 ) on Wednesday August 14, 2013 @05:12PM (#44568417)

    Sure, the recession is technically over. Thus begins the extended economic depression during which unemployment remains extraordinarily high - over 60% for young people in periphery countries - and the economy significantly underperforms its potential.

    This is all the result of a political economy which requires permanent public deficits for private sector growth in the absence of private credit expansion, combined with a private debt overhang prohibiting such an expansion.

  • Not newsworthy (Score:2, Informative)

    by Anonymous Coward

    Nothing new in this submission. It's well known that real-time economic data is noisy. This holds particularly true for real GDP as well some other statistics from the national income accounts (but less so for labor-market statistics). Revisions between the first and final data release of GDP average somewhere around 1 percentage point (that's in the US data, but it's probably relatively similar in the EU).

  • by Anonymous Coward

    The European welfare state is unsustainable. [] It's unsustainable in the short run for the PIIGS, but also, with declining birth rates and rising debts, unsustainable even for Germany and other Northern European countries. Even the smallest nods towards austerity are greeted with riots. The only question is how much pain, economic collapse and hyperinflation happen on the way down.

    • Things aren't allowed to collapse until the German election is over. Expect to see things to move after this September.
  • by Lawrence_Bird ( 67278 ) on Wednesday August 14, 2013 @05:56PM (#44568723) Homepage

    is the GDP report even valid? Given the multi-decade manipulation of the way the deflator (inflation) is calculated it is quite possilbe that not only Europe, but the US as well, has been in recession since the early 2000's. Shadowstats is an outfit that provides US figures using the most recent prior methodology - I think it is circa 1992. And remember, the government(s) have a very vested interest in keeping the "official" inflation figure low - it lowers any payment tied that rate (social security, procurment contracts) while also making the GDP figure look better.

    • by khallow ( 566160 ) on Thursday August 15, 2013 @07:27AM (#44572305)
      The problem is that this sort of thing is highly subjective. Basically, the old system of inflation was to take a fixed basket of goods that was thought to represent the demand of a particular group (consumers, manufacturers, etc). That turns out to have problems because that basket of goods slowly becomes obsolete.

      So then, they changed it to the current hedonics system [], which as I understand the intent, is supposed to be a parameter space of baskets of goods of equivalent utility to our groups in question (here, attempted by decomposing goods into their functions and treating good bundles as equivalent which have equivalent combinations of these functions). So in particular, substitution of expensive goods with less expensive goods of equivalent quality are allowed. One then looks at the point on that parameter space with the lowest cost to the group in question and that becomes the basis of an inflation calculation.

      I see plenty of means to distort this sort of calculation by deciding which functions are more important and lowering the weight of stuff that has an exceptionally high rate of cost increase (such as housing, education, and medical care - which is true throughout the developed world, I might add).
      • 1) Steak is too expensive? Eat chuck hamburger instead. Deflation.
        2) Laptop costs less? Deflation.

        #1 is crazy on the face of it and yet thats part of the calculation. #2 I feel is disengenous as the price drop was due to productivity and not "deflation". As much of the manufactured goods these days are high tech electronics (which all tend to have rapid price drops as production techniques are sorted out) there is a constant anchor from keeping the reported inflation rate from climbing. Never mind th

  • GDP grew by 0.3%. If I remember GDP figures correctly they usually have a error margin of +/- 0.5.

  • Great, now all the staff that work for companies that aren't contracting and are still making nice big profits thank you very much, now they can give them a proper pay rise that makes up for when they shafted them with 0% pay rises because of the 'recession'.

    If you accepted a 0% pay rise then you're a mug and the directors who gave themselves another 10% are laughing at you.

  • Recently I was involved in research that showed big polarization in EU from North to South. There is big need to change mentality but this is not a fast process ... More details in this link []
    • That was a fascinating read (some statistics required). Is the butchers vs neurosurgeons example a commonly used model? It reminds me of an old joke I vaguely remember from when the EU was smaller:

      The Europe we want is where the cooks are French, the police are British, the mechanics are German, the lovers are Italian, and the bankers are Swiss.

      The Europe we have is where the cooks are British, the police are German, the mechanics are French, the lovers are Swiss, and the bankers are Italian (well the l []
  • Those died in 1975 or so, and there will hopefully never be another boom in the West like the one between 1945 and 1975. The reason is simple: everything was destroyed in 1945, hundreds of millions had died, and everything was there to be rebuilt. This is fortunately no longer the case.

    However this is not a normal situation. In peace, we should all expect a small, steady growth, more or less proportional to the population increase, but not much more, e.g. in the West anywhere between 0.5 to 2% a year. Anyth

  • Recent figures suggesting (very) modest growth in the UK have been greeted with enthusiasm, but I still think as a country we're in trouble, and a big part of that I think is that wages have not in any way been keeping up with the huge rises in house prices over the last 20-30 years.

    The government is encouraging banks to lend to house buyers by guaranteeing a portion of the mortgages, but it seems to me to just be encouraging another bubble.

    The average full-time, permanent employee salary in the UK is aroun

  • I just adore the use of the GDP to tell when an economy's in recession, depression, or not. The one in the US, for example, being declared over years ago...

    Tell that to everyone out of work, esp. those out of work for *years*.

    GDP is the mean, not the median. The "financial services" industry, incl. the market, are getting richer and richer, and so our GDP is going up, right?

    Horse hockey.

    A science has predictive power. An art has descriptive power. "Economics" has neither; rather, it has the track record of

A committee is a group that keeps the minutes and loses hours. -- Milton Berle