Global Recession Fears Grow as Strong Nations Weaken
It has been several years since the financial crisis within the eurozone erupted, resulting in weak and anemic economic growth that still eludes that union. The eurozone has been inundated with uncertainty and volatility in the financial markets. This has led to a loss in confidence by businesses and, ultimately, consumers.
It appears that the lack of economic growth within the eurozone is spreading to financially stronger nations. I have already mentioned that there are signs that Germany might be witnessing a slowdown in economic growth; now, we get a report from Statistics Finland that the recession has spread to that nation, as the country’s economy contracted by 0.1% in the third quarter from the second quarter of 2012. Compared to the third quarter of 2011, Finland’s economy shrank by 1.2% year-over-year. (Source: “Gross domestic product contracted by 0.1 per cent from the previous quarter and by 1.2 per cent year-on-year,” Statistics Finland, December 5, 2012.)
The volume of exports decreased by 1.8%, while imports decreased by 4.1% (both year-over-year figures). With the lack of economic growth within the eurozone now seeping into the stronger countries, this raises serious questions as to the possibilities of a continuation of financial strain on that economic union and a spreading of the financial crisis worldwide.
One serious worry is the 4.4% decline in investments year-over-year. For the eurozone countries, economic growth needs a certain level of business investment. If businesses don’t feel that there is a strong possibility for economic growth in the future, this will lead to lower levels of capital expenditures, which will reduce the long-term economic growth potential.
The fear is that throughout the eurozone, economic growth will continue to lag far below potential. This can have a snowball effect, in which fears of poor economic growth will mean fewer investments by firms, which leads to a less productive corporate structure, which ultimately leads to a loss of jobs as firms look to other places in the world that provide a better business climate.
The world is now more closely linked than ever before. Money knows no boundaries and will flow to areas of strong potential for long-term economic growth. The eurozone has continued to be weighed down by debt issues and by an increased number of areas of the economic union becoming progressively anti-business. This, as we all know, is counterproductive to creating jobs. Businesses create jobs, not the government.
Americans should be aware that what occurs in the eurozone can and will have an effect on our shores. The extent to which we feel a further decline in the eurozone’s lack of economic growth is not yet certain; however, we should be aware that weakness is spreading. Focusing on businesses that primarily operate in America can offer some defense, and avoiding exposure to the eurozone is imperative.