The economic recovery in the euro area is continuing but it is not completed yet. Growth had picked up to 0.5% in the first quarter of 2015, the strongest performance since the upswing started in the spring of 2013. The Gross Domestic Product (GDP) in European Union expanded 1.80 percent in the fourth quarter of 2015 over the same quarter of the previous year.
Since 2013, the pace of expansion has slackened, to 0.4% last spring and an average quarterly rate of 0.3% in the second half of last year. Indeed, euro-zone GDP in the final quarter of 2015 was still below its pre-crisis peak of early 2008. GDP Annual Growth Rate in European Union averaged 1.67 percent from 1996 until 2015. Among the Member States, the biggest economies are Germany (21 percent of total EU GDP); the United Kingdom (16 percent); France (15 percent); Italy (12 percent) and Spain (8 percent).
The sluggish pace of the recovery has been especially disappointing given the fact that the euro area has benefited from two important things. First, the fall in energy prices caused by the collapse in the oil price acted in much the same way as a tax cut, boosting consumer spending. Second, the European Central Bank has carried out quantitative easing since March 2015. Together with the introduction of negative interest rates in June 2014, this has brought the euro down and kept it weak, helping exporters and contributing to a big current-account surplus of 3.7% of GDP in 2015.
Growth in 2016
Economists are peering into their crystal balls and making predictions for the next 12 months. One of their forecasts would be for stronger European economic growth. Indeed, this could well be the strongest year for growth across the European Union as a whole since 2007. Taking the 28 economies of the EU together, GDP in the third quarter of 2015 was 1.9% up on a year ago, only just behind the 2.1% growth achieved in the US over the same period. The EU unemployment rate has now fallen to 9.3% – the lowest level for more than six years.
Spain has seen the biggest turnaround – with growth picking up to 3.4% and unemployment falling by 500,000 over the past year. There has been a more modest improvement in Portugal. Italy has also seen a big fall in unemployment. These are good news for European economy.