The theory that some or all the economies of the developed world could fall into a double dip recession got support today as the euro zone reported that growth among its nations rose only .1% in the fourth quarter compared with the third and dropped 2.1% for all of 2009.
GDP in Germany, the largest economy in the 16-member group, was flat in the last quarter of 2009. The Greek economy shrunk by .8%.
Whatever hope there was that a modest recovery in Europe would help it to offset economic problems in Greece, Spain, Italy, and Portugal has faded. As a result, the European Central Bank is likely to keep rates low.
The most important result of the slowdown is that economies that are not in recovery will almost certainly have rising national debt as they ramp up stimulus packages in the hope of boosting GDP numbers in the second half of this year. Major EU nations are already faced with the costs of a bailout of Greece. The numbers for Spain and Portugal show that those countries may need aid and may need it sooner than expected.
The economy of the EU has moved toward a double dip, if it is not there already. Figures for the current quarter will be released this May. But, the likely results are already plain. The weakest economies in Europe have weakened further and the largest economies are barely in a recovery at all.
Douglas A. McIntyre
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