Economic Slowdown in Europe

August 26, 2008 (0530 hrs GMT): With a contraction in economy and record rise in inflation figures in the last two quarters, eurozone economy is facing a slowdown, if not a 'recession'. According to Eurostat, an official agency of EU, the economy in all the EU countries taken together contracted by 0.2 per cent in the Apr-June quarter. This is primarily reflected in the worst ever economic growth of the regions, at a rate of even less than zero. It was in 2003 that the region registered a lower economic growth than the present slowdown.

Germany is the only country which has been following the right policy measures that could offset the slowdown since the beginning of the year. Registering a growth of 1.3 percent, Germany had, in fact, botched up the eurozone economy till March 2008. In the second quarter, however, when Germany's economic growth rate decreased by 0.8 percent, the buoyancy in the eurozone also slipped away. Inflation in eurozone currently stands at 4 per cent.

Well into the third quarter of the year, Britain also is coming to terms with the sudden end of the buoyant economic situation it enjoyed for the last 16 years. One may recall that Britain's economic growth began well before Tony Blair came into power in 1994, and was marked by an increase in employment rates, steady rise in disposable income, large scale immigration of skilled workers to the country and record high prices of residential and commercial properties. Situation in the country seems to have taken a U-turn when the popularity ranking of British Prime Minister and Labor Party's once coveted economic problem-solver Gordon Brown dipped recently. Amidst rising fuel prices and skyrocketing commodity and food prices, it's doubtful whether Gordon Brown's leadership will be able to bail the nation out from the quagmire.

Banking sector in the eurozone is worried about falling property prices and increasing levels of consumer debt. In tandem with decreasing purchasing power parity of the consumer, retail sales has slackened, service sector has slowed down, while industrial output has declined in view of less consumer spending. The writing is on the wall for EU, which was tad too hesitant to attend to the subsistence concerns of farmers of developing countries during the Doha negotiations which failed in Geneva in July 2008. It can be inferred that only concerted efforts to increase food production and its supply in the global market, as well as a proactive approach to resolve oil-crisis can pay-up in such situations of crises. Going by EU's stakes in various economic fora, which it attended recently, it may be concluded that the world has to wait for a few more years before the entity can bring the concept of "parity" on to the stage of global trade in agriculture products, commodities and services, if not in other economic transactions with developing nations. Therein lies the key, though.