From Spain, Germany To Portugal: All 20 Eurozone Countries Have Now Sunk Into Recession

Nearly two weeks after Europe¡¯s largest economy and the world¡¯s fourth largest, Germany, fell into recession, the remaining 19 countries that are part of the Eurozone, too, have sunk into recession.

The euro zone economy fell into a technical recession in the first three months of 2023, data from the statistics agency Eurostat showed on Thursday, as signs emerge that central bank rate hikes will weaken the region's future growth prospects.

The IMF and World Bank have repeatedly warned of a global recession's possibility this year.

List Of 20 Countries In The Eurozone

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For the unversed, the ¡®Eurozone¡¯ is a currency union of 20 member nations of the European Union that have adopted the Euro as their primary currency and legal tender.

The list of countries that are part of the Eurozone includes Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The Eurozone Falls Into Recession

Gross domestic product (GDP) for the 20-country euro zone fell by 0.1% in the first quarter compared with the final quarter of 2022, when GDP also slipped by 0.1%, revised from a previous reading of zero. Two successive quarters of contraction in GDP are commonly described as a technical recession, as per a Reuters report.

Also Read: How Germany's Recession Can Impact Indian Economy

More About The Eurozone Countries

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All European Union Member States are part of the Economic and Monetary Union (EMU) and coordinate their economic policy-making to support the economic aims of the EU. However, a number of Member States have taken a step further by replacing their national currencies with the single currency, the euro. These member states form the euro area.

When the Euro was first introduced in 1999 as 'book' money, the euro area was made up of 11 of the then 15 EU Member States. Greece joined in 2001, just one year before the cash changeover, followed by Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014, Lithuania in 2015, and Croatia in 2023. Today, the euro area includes 20 EU member states, as per the European Commission.

Of the Member States outside the euro area, Denmark has an 'opt-out' from joining laid down in a Protocol annexed to the Treaty, although it can join in the future if it so wishes. Sweden has not yet qualified to be part of the euro area.

The remaining non-euro area Member States are among those that acceded to the Union in 2004, 2007, and 2013, after the euro was launched. At the time of their accession, they did not meet the necessary conditions for entry to the euro area but have committed to joining as and when they meet them; they are Member States with a 'derogation', such as Sweden.

Andorra, Monaco, San Marino, and the Vatican City have adopted the euro as their national currency by virtue of specific monetary agreements with the EU, and may issue their own euro coins within certain limits. However, as they are not EU member states, they are not part of the euro area.

Also Read: How To Be Financially Prepared For A Recession

What Oxford Economics¡¯ Analysts Opine Amid Recession

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"Domestic demand is not in a good place," Oxford Economics' analysts said in a note, adding that first-quarter public spending saw the largest contraction on record except for during the first wave of coronavirus lockdowns in 2020. "Going forward, growth will remain soft despite dropping wholesale energy prices as monetary policy tightening dents investment and still-present inflationary pressures constrain consumption," they said, as per a Reuters report.

Separately, economists polled by Reuters expect quarterly growth to rebound by an albeit modest 0.2% in each of the remaining three quarters of this year and tip the European Central Bank (ECB) to hike by a further 25 basis points at both its June and July meetings in its effort to counter stubborn inflation.

That would take the ECB's deposit rate up to 3.75%, an unprecedented tightening of 425 basis points since the bank lifted rates out of negative territory last July.

Eurostat said euro zone GDP was 1.0% up in the first quarter from a year earlier, lower than a flash estimate of growth of 1.3% published on May 16. Economists polled had forecast a 1.2% yearly expansion and zero growth for the quarter.

The revision was principally due to a second estimate from Germany's statistics office showing that the euro zone's largest economy was in recession in early 2023. The contraction in Ireland's economy widened to 4.6% from a preliminary estimate of 2.7%, although this was due to the impact of large multinationals on growth there.

Also Read: India Has Zero Probability Of Slipping Into Recession, Reveals Survey

"Eurozone's Recession Was Expected"

A recession had been expected towards the end of last year as the euro zone wrestled with high energy and food prices and as a post-pandemic spending boom faded. Initial estimates had suggested the region had avoided this.

Along with Germany and Ireland, GDP also declined quarter-on-quarter in Greece, Lithuania, Malta, and the Netherlands.

Eurostat said that household spending stripped 0.1 percentage point, public expenditure 0.3 points, and inventory changes 0.4 points from quarterly GDP. Gross fixed capital formation added 0.1 point, and net trade added a further 0.7 point as imports declined.

Conversely, employment growth accelerated at the start of 2023, rising to 0.6% in the first quarter from 0.3% in the fourth quarter of 2022, in line with earlier estimates. That was 1.6% up year-on-year. On a quarterly basis, employment grew in every country except Greece, Lithuania, and Slovakia.

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