Greece Plunges Back Into Recession

GDP for the European Union rose 0.4% over the final quarter of 2014. While the number is small, based on trends in several of the world’s largest economies, it remains a sign that after years of GDP erosion, Europe has bounced back slightly. Based on U.S. first-quarter GDP, which was 0.1%, Europe’s results are impressive.

Greece fared the worst among the nations in the region. GDP dropped 0.2% compared to the fourth quarter of 2014. Fourth-quarter GDP dropped 0.4% compared to the previous quarter. If two quarters of GDP contraction signal recession, then Greece has more financial trouble than payment of its debts and high unemployment. The Greek GDP trend in the future will be compounded by the nation’s inability to collect taxes and by pressure from the International Monetary Fund, European Central Bank and European Union to meet debt obligations or plunge into default. Schools of thought about it default run from little effect of a default on the balance of Europe because of Greece’s tiny GDP to catastrophic effects on the financial system, in part because of the size of the entire Greek debt pool.

Germany’s economy slowed, which is not good news for the balance of the region. Germany is far and away the largest country in Europe, based on GDP. The nation’s GDP was up by only 0.3% in the first quarter, compared to the fourth quarter of last year. Other large economies, which include France, Italy and crippled Spain, showed very modest improvement. France’s GDP expanded 0.6%, Italy’s 0.3% and Spain’s by 0.9%.

ALSO READ: Countries Spending the Most on War

While the numbers for countries in the region seem good, particularly for Spain, the trend is less impressive against the drop in these economies during the recession. It will take years for Spain’s GDP to get back to prerecession levels, if it can get there at all. Unemployment in the country hovers above 20%. Among young adults, the number is twice that.

Greece’s economy likely cannot ever match its best years. Unemployment levels are as bad as, if not worse than, Spain’s. That alone tells that Greece will be unable to come back enough to allow for ongoing, permanent solutions to its debt problem.