The euro area’s recovery unexpectedly stalled in the second quarter as its three biggest economies failed to grow, underlining the vulnerability of the region to weak inflation and the deepeningcrisis in Ukraine.

Gross domestic product in the three months through June was unchanged from the first quarter, when it increased 0.2 percent, Eurostat, the European Union’s statistics office in Luxembourg, said today. The median of 37 forecasts in a Bloomberg News survey was for growth of 0.1 percent. In a separate report, the agency confirmed inflation at 0.4 percent in July.

Having led the bloc out of its longest-ever recession last year, Germany’s economy shrank 0.2 percent in the second quarter, its first contraction since 2012, while France unexpectedly stagnated, data showed today. Italy succumbed to its third recession since 2008, with GDP falling 0.2 percent in the April-June period.

David Fuller's view

The sanctions against Russia, while very necessary in my opinion, can only contribute to the problems in Europe’s economies while they persist.  However, the tense situation with Putin’s Russia is unlikely to be a permanent problem.  Europe’s economies have been underperforming their GDP growth potential almost since the onset of the European Union.  I say this with no satisfaction; it has long been a subject of considerable dismay for me, not to mention many Europeans. 

Here is Bloomberg’s editorial on the subject: Europe’s Economy Is Broken.

The consequences are obviously worrying for Europe’s GDP growth and unemployment.  These problems are also a drag on the global economy.

Ironically, this is probably favourable for most global stock markets.  Europe’s economic woes further delay the next cycle of synchronised global GDP growth, which drives up both inflation and interest rates, killing off bull markets in the process.