Euro Zone Sinking into a deep hole

From Economist.com :

The euro area is falling into such a deep hole that the recovery, when it eventually comes, will be a long, hard journey. Figures released on Friday May 15th showed that GDP in the 16-country currency zone fell by 2.5% in the first quarter, an annualised rate of some 10%, far worse than many analysts had feared. Germany, the largest economy in the group, fell even harder: its GDP shrank by 3.8% in the three months to March and has plunged by almost 7% since its recession began a year ago. Italy’s GDP fell by 2.4% in the quarter; Spain’s by 1.8%. The 1.2% fall in France, large by any normal standards, almost counts as a boom.

The figures confirmed that the euro zone has been hit far harder by the global downturn than its rich-world peers (and largest export markets) in America and Britain. When spending in these countries dried up, because of scarce credit, they exported some of the pain to their suppliers. For that reason Germany has so far paid a higher price for its reliance on exports than the Anglo-Saxon countries have borne for their dependence on credit and rising house prices. Since the collapse of Lehman Brothers in September, export-led manufacturers have been hit hardest. For example Slovakia, the euro zone’s newest member (it joined in January), saw its GDP crash by 11.2% in the first quarter. Its economy leans heavily on carmaking and its loss has been far more severe even than in Germany.

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