After a historically awful beginning to 2009, the European Union had a surprisingly strong second quarter with Germany and France even recording positive growth. Now wait -- I thought the recession in Europe was supposed to be worse than the United States. Earlier this year, EU economies were contracting 50 percent more than the US and last quarter was the worst quarter for jobs in EU history. Is this recovery for real?
Germany and France especially seem to have bounced from abysmal first quarters. In particular, Germany's GDP growth went from negative-3.5 to positive-0.3 percent. But there is plenty of concern throughout the continent that the surprise bump is either unsustainable or the beginning of a slog that (oh, this will sound familiar) won't feel like a recovery for Europeans. From the Times:
However, economists expect a divergence in performance between the United States and Europe next year as lagging efforts to repair a damaged banking system in key countries like Germany and sharply rising unemployment tarnish the outlook in Europe over the next six months.
In the long run, I think it will be fascinating to look back at the EU and US responses to the crisis and compare what worked and what did not. The EU, with its much more limited fiscal and monetary reaction to the crisis, have been slammed by liberal economists like Paul Krugman, who argue that America's ability to avoid a depression is largely due to the massive government overlays in the last year. Meanwhile, more conservative economists might cast an eye to countries in Europe, who have been more spendthrift in their recession-busting policies.
It is possible, of course, that the true "winner" of this recession will not be known for quite some time, considering that unemployment is likely to remain quite high through 2010 on both sides of the Atlantic, and many conservative economists argue that the true cost of the Federal Reserve's ginormous balance sheet will not be known for years. Still, we can be happy for our neighbors across the pond that at least their recession appears to have hit the bottom, as it almost certainly has in the States.