Eurozone Exits Recession: The View From The Top … And Bottom

Correspondents report on business life in Germany, France, Italy, Greece and Ireland.

A fastfood shop in Thessaloniki city centre, Greece.

A fast food shop in Thessaloniki city centre, Greece Photograph: Giannis Papanikos/ Giannis Papanikos/Demotix/Corbis


The view from the top of the eurozone


For one of the 340,000 small- and medium-sized businesses that make up Germany’s renowned Mittelstand economy, Wednesday’s figures proved the wisdom of sticking doggedly to long-term goals. Phoenix Contact, an electronics manufacturer based in Blomberg in central Germany, decided not to take the axe to its operations in southernEurope when the eurozone tipped into crisis.

“In Europe last year, growth was flat,” said Frank Stührenberg, vice-president of global sales at Phoenix Contact. “And in southern Europe, we were seeing minus growth.” Yet rather than desert Europe completely for its more profitable American or Asian markets, the firm kept its workforce and waited for recovery.

“We didn’t take our people out of Spain for example, we even put more investment in. And that’s paying out returns now,” he said.

And as Wednesday’s figures show Europe’s crisis economies slowly picking up, the Mittelstand economy is set to reap the benefits. Steady increases in investment in energy and transport infrastructure in southern Europe have already bolstered Phoenix Contact in Italy and Spain this year, where the firm is finally seeing growth after years of losses, said Stührenberg.

“We’re benefiting from that as a subcontractor,” he said, “everybody in Germany is profiting a bit now from this.”

Mittelstand companies like Stührenberg’s employer have not been complacent, and have used the dead time waiting for European recovery to scan the horizon for the next big innovations. For Phoenix Contact this means focusing on Germany’s future as a leading producer of renewable energy.

Now seeing annual growth of around 4.5%, the company – which supports a global workforce of 12,800 – is, like the rest of the German economy, “not about to sit back and relax,” said Stührenberg.


News that the eurozone’s second largest economy had exited recession came as an unexpected fillip for France’s socialist government, which has based its 2014 budget on 0.2% annual growth. Official data showed that the economy grew by 0.5% in the second quarter. The French finance minister, Pierre Moscovici, said: “The figure, higher than available forecasts, confirms that the French economy has come out of recession, which was already hinted at in recent surveys and figures for industrial production, consumption and foreign trade, and amplifies the encouraging signs of recovery.”

The manufacturing sector was particularly dynamic, showing 2% growth in the second quarter, with production in the automobile and aeronautic industries leaping by 8.2% in the second quarter.


The view from the bottom of the eurozone



Like many Greeks, Kostas Xexakis was left bewildered by the news that the eurozone recession is officially over. For the 62-year-old framer, working out of a two-room atelier in Athens’ Kolonaki district, the downturn feels anything but over and he counts himself lucky: he still has a job and a few customers to boot.

“In no way could you possibly say the recession has ended,” he said. “Everyone I know is squeezed and with unemployment at more than 27% I don’t see things getting better anytime soon.” The Green economy contracted by 4.6% on an annualised basis in the second quarter of 2013 – the 20th consecutive quarter of decline.

Across Athens tens of thousands of family-owned businesses and shops – once the lifeblood of the Greek economy – have been forced to close, their shuttered exteriors one of the most visible signs of the collateral damage wrought by the nation’s worst crisis in modern times.

In upmarket Kolonaki, Xexakis does not have that problem. But work has dropped dramatically, and like all Greek businessmen he has been hard hit by reduced earnings, consumer prices that have remained stubbornly high, and a cascade of “emergency” taxes enforced in a bid to increase revenue.

Echoing a widely held view, Xexakis believes things will only begin to improve when international creditors propping up the economy decide to ease off on the austerity that has plunged Greece into ever deeper recession. “Our only hope, unfortunately, lies with Germany deciding to give us a break because, clearly, austerity isn’t working,” he insisted.


In the heart of Ireland’s traditional folk music scene, in county Clare on the west coast, there are signs of a recovery in the country’s struggling services sector. Donal Minihane, owner of the Hotel Doolin, has seen an upturn in European visitors for the first time in years. “We saw people coming to us from all over Europe and the UK and even the United States. But there were a huge amount of European visitors for the first time in many years.”

Situated at the edge of Doolin village, the hotel has enjoyed a spike in tourist numbers this year with room rates now up by 15% and an increase in staff to 80. Having staged three festivals at the hotel this year – for lovers of literature, beer and folk music – Minihane is optimistic that business is starting to take off and that perhaps the worst of the recession in Ireland is over.

“Next year is looking very good, especially the weddings market. I have no vacancies in 2014 from May to October.”


The eurozone’s exit from recession comes amid cautious predictions in its third-largest economy that an eight-quarter long recession there may soon be over, too. Enrico Letta’s government is predicting a return to modest growth by the end of the year. That hope was boosted by news the economy contracted less than expected in the second quarter, by 0.2%.

“For the time being we still have some domestic headwinds which are weighing on growth,” said Marco Valil, chief eurozone economist for UniCredit in Milan. “But we think that in the course of the year we will see Italy exiting the recession.”

He said the drivers of this modest recovery would be an easing of fiscal consolidation, low inflation and improving global growth due to improvements in Italy’s top two trading partners – Germany and France.

For the moment, however, the spumante will be kept on ice. Italy’s longest recession since the second world war has seen unemployment rise to over 12%, with youth joblessness at over 39%.

– The Guardian