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After six quarters of decline, the eurozone has finally emerged from recession, and what is more, it did so by growing above (admittedly low) expectations. Yet there is a long way to go before the currency bloc is restored to full health, and with unemployment above 12% there is a way to go before the fragile recovery can become cemented by strong and sustained private consumption.
A new Franco-German pact
The two biggest economies in the region both surprised on the upside:
Real GDP Growth in France, Germany and the Eurozone: Q3 2010-Q2 2013
Note: Data are seasonally adjusted
Uneven growth remains the rule
The positive growth masks declines in the third, fourth and fifth largest economies in the eurozone – Italy, Spain and the Netherlands – which declined by 0.2%, 0.1% and 0.2% respectively. These economies accounted for a combined €1,870 billion of consumer expenditure in 2012, equivalent to more than one third of consumer spending in the eurozone. With performance across the region patchy, strong sustained growth is unlikely to be achievable in the short-term.
Although Q2 figures are to be welcomed, the outlook for the eurozone remains one of weak growth. With high unemployment and with a relatively weak external environment the eurozone can expect to continue on its long and lingering path to recovery.