The economic situation in Europe has pretty much been given a pass by the mainstream media over the past year or so, however, recent statistics show that the community is bouncing around recession territory.
Let's start with this graph comparing GDP growth rates on a quarter-over-quarter basis for the EA17, EU28 and the United States:
On a quarter-over-quarter basis, third quarter growth for the EA17 was up 0.1 percent and 0.2 percent for the EU28. On a year-over-year basis, third quarter growth was down 0.4 percent for the EA17 and up 0.1 percent for the EU28. It is also interesting to see that growth for the broader Europe is higher than that of the EA17, a situation that has been common since the early part of 2011.
Here is a list of the top five EU28 nations with positive year-over-year quarterly growth in the third quarter of 2013:
1.) Romania: 4.1 percent
2.) Latvia: 3.9 percent
3.) Lithuania: 2.2 percent
4.) Hungary: 1.6 percent
5.) United Kingdom: 1.5 percent
Here is a list of the top five EU28 nations with negative year-over-year quarterly growth in the third quarter of 2013:
1.) Cyprus: -5.7 percent
2.) Italy: - 1.9 percent
3.) Czech Republic: -1.6 percent
4.) Spain: -1.2 percent
5.) Portugal: -1.0 percent
Note that data from Greece was not supplied for Q4 2013, however, on a year-over-year basis in Q3 2013, the Greek economy contracted by 3.8 percent, an improvement over the -5.6 percent from Q2 2013.
Of the EU28 nations reporting their year-over-year quarterly growth for Q2 2013, we find that 11 or 39 percent of the nations saw negative economic growth and the remaining saw positive quarterly year-over-year economic growth ranging from 0.1 percent (Sweden and Belgium) to 4.5 percent (Latvia). Of the 17 with positive growth, 9 had growth rates of less than 0.6 percent. In any world, that can hardly be termed "growth".
Now, why should those of us who live in North America care about Europe's no-growth scenario?
Let's start with Canada. In 2012, Canada was the EU's 12th most important trading partner accounting for 1.8 percent of the EU's total external trade. In 2012, the EU was Canada's second most important trading partner after the U.S. with around 9.5 percent of Canada's total external trade. Here are two bar graphs showing the rather stagnant growth levels of EU imports and exports of both services and goods with Canada for the years from 2010 to 2012:
In 2012, bilateral trade in goods totalled $86.8 billion and bilateral trade in services totalled $37.8 billion.
Now, let's look at the United States economic relationship with the EU. Total U.S. investment in the EU is three times higher than what it has invested in all of Asia. Total EU investment in the U.S. is eight times the amount of EU investment in India and China combined. The EU and U.S. economies combined account for about half of the world's entire GDP and nearly one-third of the world's trade flows. Here are two bar graphs showing the EU imports and exports of both services and goods with the United States for the years from 2010 to 2012:
In 2012, bilateral trade in goods totalled $701.1 billion (U.S.) and bilateral trade in services totalled $402.5 billion (U.S.). You will also notice how trade between the two entities grew substantially between 2010 and 2012, unlike Canada which saw modest growth at best.
From this data, we can see that trade with Europe is very important to both the Canadian and American economies. With the world's trade patterns so interconnected, a weak economic link on the east of the Atlantic Ocean could prove troublesome for the economies on the west side. With economic growth in Canada and the United States being modest at best, the situation in Europe will likely put downward pressure on growth rates for North America as the economic contagion spreads.