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Macroeconomics

17 February 2014

Europe's shared growth 

The latest European economic growth figures suggest a narrowing gap between the performance of core nations and those on the periphery.

Policymakers are daring to hope that recovery is no longer confined to Germany and a few of its neighbors but is starting to lift the countries battered by the eurozone debt crisis.

GDP rose by 0.3% in the euro area in the fourth quarter, compared with 0.1% between July and September. The 17 member countries need substantially faster growth to reduce unemployment, but after the past three year of economic and financial turmoil, any growth is welcome.

The most encouraging news was that Italy’s economy, which has barely expanded in a decade, grew in the last three months of 2013 and that Spain’s picked up pace. France, the continent’s second-largest economy, also emerged from stagnation.

Other eurozone nations are also gaining traction: growth jumped quarter-over-quarter in Austria, Belgium, Portugal and the Netherlands. The only glaring trouble spot is Finland, where GDP contraction deepened in the fourth quarter.

A narrowing of the gap between the eurozone’s core and peripheral nations might ease the tensions within the bloc and arguments about whether monetary policy should be aimed at keeping inflation low in Germany or stimulating growth around the Mediterranean.

While painfully slow, the rebound in the peripheral countries contrasts with predictions not so long ago that economic divergence within the euro area would doom the single currency project to collapse.