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Economy of the European Union
Eurozone’s economy grew by 0.3% in Q4 2013, up from 0.1% growth in the previous quarter.
It was the third quarter of growth since the end of an 18-month recession, the longest period of contraction to affect the single currency area.
The eurozone figures include 17 of the EU’s economies. Latvia became the currency zone’s 18th member in January.
Across the whole 28-nation EU, including the UK, growth for October-to-December 2013 period was 0.4%.
The figures from Eurostat, the EU’s statistics office, also showed that during 2013, GDP contracted by 0.4% in the eurozone, but increased by 0.1% in the EU as a whole.
“The eurozone’s recovery has moved up a gear,” said Chris Williamson, chief economist of Markit.
“Not only has the pace of growth picked up to the fastest since the second quarter of 2011, but the recovery is also becoming more broad-based, encompassing core and so-called ‘periphery’ countries alike.”
Eurozone’s economy grew by 0.3 percent in Q4 2013
Earlier, French government figures indicated the country’s economy grew by 0.3% in the last three months of 2013.
The INSEE statistical office also reported that growth was zero in the third quarter of 2013, revised up from an initial estimate of a 0.1% contraction.
The figures mean that the world’s fifth-largest economy escaped falling back into recession.
Over the whole of 2013, the French economy grew by 0.3%.
The German economy also notched up higher growth in the October-to-December period.
According to the federal statistics office, Destatis, Germany’s GDP expanded by 0.4% in the final quarter of 2013, after seeing growth of 0.3% in the previous three months
Destatis said the figures were boosted by exports and capital investment, but there were “mixed signals” from domestic demand, with a drop in household spending.
According to preliminary figures, Germany’s economy grew by 1.3% in 2013, the statistics office said.
In general, the German figures were better than analysts had been expecting.
Italy’s official statistics office also issued figures showing that its economy returned to growth after a two-year recession.
Istat said GDP grew by 0.1% in the final quarter of 2013, after showing zero growth in the previous three months.
However, during 2013 as a whole, the economy shrank by 1.9%.
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The European Commission has decided to suspend talks on EU-US free trade deal amid concern that hard-won social protections in Europe might be undermined.
The trade negotiations began in 2013 but now the Commission has launched a three-month public consultation on the proposed investment rules for firms.
The aim is to close legal loopholes.
Consumer and environmental lobbyists say there is a risk of the EU accepting lower US standards in many areas.
The proposed EU-US Transatlantic Trade and Investment Partnership (TTIP) could bring huge benefits for Europe and America, the Commission says.
The European Commission has decided to suspend talks on EU-US free trade deal amid concern that hard-won social protections in Europe might be undermined
A 2013 EU study estimated it could boost the size of the EU economy by 120 billion euros ($162 billion) – equal to 0.5% of GDP – and the US economy by 95 billion euros (or 0.4% of GDP).
But several European NGOs) and MEPs have questioned the investment rules, fearing that they could tie governments’ hands in the face of powerful US corporations.
Last week 10 European NGOs issued a joint statement raising doubts about the TTIP’s mechanism for legal disputes, called the “Investor-State Dispute Settlement (ISDS)”.
The statement said there was a risk the mechanism could “open the gates for multinationals and investors to sue EU member states if new environmental or health legislation is introduced that adversely affects their business prospects”.
It warned of a “chilling” effect – the fear that legislating in certain areas of public health or the environment could trigger expensive lawsuits with US companies.
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Latvia has joined the eurozone as of 1st of January 2014, becoming the 18th member of the group of EU states which uses the euro as its currency.
The former Soviet republic on the Baltic Sea recently emerged from the financial crisis to become the EU’s fastest-growing economy.
Correspondents report much skepticism in the country after recent bailouts for existing eurozone members.
But there is also hope that the euro will reduce dependency on Russia.
EU commissioner Olli Rehn said joining the eurozone marked “the completion of Latvia’s journey back to the political and economic heart of our continent, and that is something for all of us to celebrate”.
The government and most business owners also welcomed the single currency, saying it would improve Latvia’s credit rating and attract foreign investors.
However, some opinion polls suggested almost 60% of the population did not want the new currency.
Latvia became the 18th member of the group of EU states which uses the euro as its currency
“It’s a big opportunity for Latvia’s economic development,” PM Valdis Dombrovskis said after symbolically withdrawing a 10-euro note as fireworks led celebrations in the capital Riga after midnight.
The governor of the Latvian central bank, Ilmars Rimsevics, said: “Euro brings stability and certainty, definitely attracting investment, so new jobs, new taxes and so on. So being in the second largest currency union I think will definitely mean more popularity.”
One of those reluctant to give up Latvia’s own currency, the lats, was Zaneta Smirnova.
“I am against the euro,” she told AFP news agency.
“This isn’t a happy day. The lats is ours, the euro isn’t – we should have kept the lats.”
Leonora Timofeyeva, who earns the minimum wage of 200 lats (284 euros; $392) per month tending graves in a village north of the capital Riga, said: “Everyone expects prices will go up in January.”
But pensioner Maiga Majore believed euro adoption could “only be a good thing”.
“To be part of a huge European market is important,” she told AFP.
“All this talk about price rises is just alarmist.”
Alf Vanags, director of the Baltic International Centre for Economic Policy Studies, told Bloomberg news agency he personally did not like giving up the familiar lats but it was an “entirely irrational sentiment”.
Euro adoption was good for Latvia “on balance”, he argued, since it provided a mutual insurance policy that countries could draw on when they got into trouble.
Latvia, with its large ethnic Russian minority, is often seen as having closer economic ties to Russia than its fellow Baltic states Lithuania and Estonia. Russia remains an important export market while its banking system attracts substantial deposits from clients in other ex-Soviet states.
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The European Commission has warned Italy and Spain that their draft budgets for 2014 may not comply with new eurozone debt and deficit rules.
The European Union’s executive arm also said French and Dutch plans only just passed muster.
Non-complying countries may have to revise their tax and spending plans before re-submitting them to national parliaments.
It is the first time the Commission has done this.
The European Commission has warned Italy and Spain that their draft budgets for 2014 may not comply with new eurozone debt and deficit rules
Under EU rules, eurozone member states are obliged to cut deficits until they achieve a balanced budget or go into surplus.
They also have to reduce public debt levels.
The European Commission does give countries some flexibility if their deficit is below the EU ceiling of 3% of gross domestic product (GDP) and their debt levels are falling.
But when Italy, the eurozone’s third largest economy, asked for such leniency over its 2014 budget plans, the Commission refused because its public debt is still rising.
France, which has slipped back into recession, has taken steps to cut its deficit to below the 3% threshold, but its structural reform plans were only making “limited progress”, the Commission said.
Other countries at risk of breaking EU rules included Finland, Luxembourg and Malta.
