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Europe’s economic laggards have become leaders

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Something unusual is happening in Europe’s economy: The countries of the South, which nearly broke up the euro currency bloc during the 2012 financial crisis, are growing faster than Germany and other big countries that have long served as the region’s growth engines.

This dynamic is boosting the region’s economic health and preventing the euro zone from slipping too far. Fortunes reverse and laggards become leaders. The economies of Greece, Spain and Portugal will grow at more than twice the euro zone average in 2023. Italy is not far behind.

Just over a decade ago, southern Europe was the center of a eurozone debt crisis that threatened to break up the bloc of countries. It took years to recover from a deep national recession and billions of dollars in international bailouts and harsh austerity programs. Since then, these countries have worked to improve their fiscal positions, attract investors, revive growth and exports, and reverse record high unemployment.

Now Germany, Europe’s largest economy, is almost single-handedly dragging down the region’s fortunes. Ukraine has been struggling to emerge from a slump caused by soaring energy prices after Russia invaded Ukraine.

That became clear on Tuesday, when new data Data from Eurostat show that the euro zone’s economic output increased by 0.3% in the first quarter of this year. The Eurozone economy shrank by 0.1% in both the third and fourth quarters of last year, which was a technical recession.

Germany, which accounts for a quarter of the EU economy, narrowly avoided recession in the first quarter of 2024, growing by 0.2%.Spain and Portugal expanded at more than three times that rate, suggesting European economy continues to grow at two rates.

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