The Great Recession of 2009

One step forward, one step back?

By Thomas Mucha
Published: May 16, 2009 06:45 ET
Page 2 of 2

So, as the end of the week approached, it felt almost OK to exhale. We’re not, apparently, going to fall into the financial abyss. Economic Armageddon is not — fingers crossed — upon us.

But by Friday, hard reality had returned, showing how far key economies have fallen and how far we have yet to go.

The most unpleasant reminder came from the same optimistic place where the week began: in Europe. The 16 economies that make up the so-called eurozone contracted at the fastest pace in 13 years, with combined GDP falling 2.5 percent in the first quarter, or a stunning 10 percent annualized rate.

That’s far worse than most economists were expecting, and underscored the severity of the problem in key economies across the region.

Germany, Europe’s economic engine, dropped 3.8 percent, its worst performance since data was first compiled in 1970. The German economy has plunged 7 percent over the past year.

Italy, meanwhile, fell 2.4 percent in the quarter, the most since record-keeping there began in 1980. Spain’s economy shrank by 1.8 percent. The French economy dropped 1.2 percent. Austria’s economy shrank, too. So did economic activity in the Netherlands.

That economic pain has spread eastward, as exports dry up and investment in these formerly communist states evaporates. Five eastern members of the EU suffered economic contraction in the quarter. Latvia’s annual GDP decline is a staggering 18 percent. Hungary and Romania both recorded drops of more than 6 percent.

Then, out of China Friday, we got another fresh jolt of pain.

Beijing's Ministry of Commerce warned that exports — which fell 22.6 percent in April from a year ago, the sixth straight monthly decline — will remain subdued in coming months. Domestic demand in China won’t rise fast enough to pick up that slack, the ministry warned.

So, as we continue to monitor this ongoing crisis, it’s one step forward, one step back. Confusion. A lack of clarity. And, also, a touch of hope.

Welcome to the Great Recession of 2009.

For more on the global economic crisis:Click here for the full report

Related columns by Thomas Mucha:

Reflections on the big, sick dog

The confidence game

China's economy: Pay attention to 7 little words

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