European Economic Growth Slows Markedly

Posted August 16th, 2011 at 11:50 am (UTC-5)
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Economic growth slowed markedly in the April-to-June period in the 17-nation European bloc that employs the common euro currency, stoking new fears of another global recession.

The European Union reported Tuesday that the economy in the euro region grew just two-tenths of one percent in the second quarter, a quarter of the rate in the first three months of the year. Europe's biggest economy, in Germany, only advanced a tenth of a percent.

Analysts say the continent's sagging growth prospects could make it more difficult for the region's debt-plagued governments to boost their economic prospects and avoid the need for further international bailouts like those already secured by Greece, Ireland and Portugal.

The diminished European growth is one more indication of a slowing global economy, with other governments throughout the world already reporting meager increases in recent months and predicting limited advances the remainder of the year. The U.S., with the world's largest economy, is also faced with slowed economic growth and a contentious political debate about how to reign in deficit spending.

Official word on Europe's economic slowdown came as the leaders of Germany and France met in Paris on Tuesday to discuss the continent's debt crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy said they would discuss ways to improve economic governance in an effort to convince investors that European governments are doing enough to contain debt worries in Italy, Spain and other countries.

However, Mrs. Merkel and Mr. Sarkozy say they do not plan to discuss proposals for collectively issued “Eurobonds” as part of the solution.

Some have called for the eurozone to adopt the jointly guaranteed bonds in order to ensure affordable financing for Europe's most financially distressed countries.

Critics of eurobonds worry that such a step would reduce the incentive for weaker eurozone economies like Greece, which has now been forced to secure two bailouts, to reform their economies, and that the shared interest burdens would punish financially sound countries.

The Merkel-Sarkozy meeting comes one day after the European Central Bank announced it spent almost $32 billion on government debt last week to prop up the bond markets of Spain and Italy.

With Europe continuing to seek measures to satisfy the financial markets, the European Central Bank has been taking a more forceful role in dealing with the crisis.