Blog Post

The Euro Area: Great Recession or Great Depression?

The Great Depression was a period of severe economic contraction that lasted many years. In the United States real GDP fell every year from 1929 to 1933, when it reached only 73 percent of its 1929 level. Starting in 1934 the recovery was quite rapid, with GDP reaching its 1929 level in 1936. By contrast the Great Recession has been much milder.

By: Date: February 4, 2013 European Macroeconomics & Governance Tags & Topics

The Great Depression was a period of severe economic contraction that lasted many years. In the United States real GDP fell every year from 1929 to 1933, when it reached only 73 percent of its 1929 level. Starting in 1934 the recovery was quite rapid, with GDP reaching its 1929 level in 1936. By contrast the Great Recession has been much milder (see Figure 1a). In the US GDP only contacted from 2007 to 2009, when it fell to only 96 percent of its 2007 level. Recovery was quick, with GDP already surpassing its 2007 level by 2011. In the euro area, unfortunately, the situation has been less favorable. Although the initial contraction was similar to what happened in the US, recovery has been slower. In 2013, euro area GDP will still be below its 2007 level.

Inside the euro area, the situation is particularly alarming in Greece, Ireland, Italy, Portugal and Spain (see Figure 1b). In the last three countries, the term recession rather than depression is appropriate, but recession is severe: GDP will continue to decline in 2013 while will still remaining above 90 percent of the 2007 level. By contrast, in Greece the term recession is not appropriate. The country is clearly in depression: GDP continues to decline sharply and will reach barely 77 percent of its 2007 level in 2013. This is worse than in the US at a similar stage in time during the Great Depression. The situation of Ireland depends on whether one looks at GDP or GNP (for the other countries GDP and GNP are very similar). GDP fell till 2010 but has grown steadily since 2011. On the other hand, Irish GNP has declined severely since 2007 and although it will stabilize in 2013 it will be worse than in the US at a similar point in time during the Great Depression.

So yes, perhaps the financial crisis in the euro area is over but GDP in the crisis countries (and GNP in Ireland) still has some way to go before it returns to its pre-crisis level. This is surely a depressing situation.     

Figure 1a – Real GDP of the Euro area, Japan and US (2007=100) and the US (1929=100)

                               

Figure 1b – Real GDP of the GIIPS (2007=100) and the US (1929=100)

Data source:  AMECO, European Commission.

Note:  IrelandD (N) stands for Ireland’s GDP (GNP).


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article Download PDF More by this author

Working Paper

Cover WP 2017_06

Regional and global financial safety nets: the recent European experience and its implications for regional cooperation in Asia

Comparing and evaluating financial assistance programmes of four euro-area countries (Greece, Ireland, Portugal, and Cyprus) and three non-euro-area countries (Hungary, Latvia, and Romania) of the European Union in the aftermath of the 2007/08 global financial and economic crisis. Asian countries can draw several lessons from European experiences.

By: Zsolt Darvas Topic: European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance Date: April 20, 2017
Read article More on this topic More by this author

Podcast

Podcast

Labour mobility in Europe

With anti-immigration sentiment on the rise, we look into the issue of labour mobility in Europe. How does migration affect labour markets and how does perception of migration differ from reality? What are the economic challenges for migrants and how do these challenges reflect on social integration? We try to answer these questions with our guests in this episode of The Sound of Economics.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: April 20, 2017
Read about event More on this topic

Past Event

Past Event

Understanding the French elections

This is a restricted workshop on the forthcoming French elections to understand the challenges and possible scenarios.

Speakers: Grégory Claeys, Thomas Guénolé-Ryzhakov, Bruno Jeanbart and Guillaume Tusseau Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 19, 2017
Read about event

Upcoming Event

May
30
11:00

Geo-blocking in the digital single market

Geo-blocking is a discriminatory practice that is wide-spread in EU. It prevents online customers from accessing and purchasing products or services from a website based in another member state

Speakers: Felipe Florez Duncan, Marine Elgrichi, J. Scott Marcus, Fabian Paagman, Bertin Martens, Georgios Petropoulos, Agustin Reyna, Werner Stengg and Roza von Thun Topic: European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event

Upcoming Event

May
31
12:30

Inclusive growth: global and European lessons for Spain

Can manufacturing still be a driver for inclusive growth around the world? What European and national policies can foster inclusive growth in Europe? What is the situation in Spain and what can Spain learn from the global and European experiences?

Speakers: Cristina Cabrera, Zsolt Darvas, Maria Demertzis, Alejandra Kindelán, Robert Lawrence and Federico Steinberg Topic: European Macroeconomics & Governance, Global Economics & Governance Location: Calle Los Madrazo 36-38 Madrid
Read about event More on this topic

Upcoming Event

Jun
1-2
08:30

Fiscal frameworks in europe: background and perspectives

On 1-2 June Bruegel together with Danmarks Nationalbank and the Copenhagen Business School will organise a conference about fiscal frameworks in Europe. The conference will re-evaluate fiscal frameworks in Europe in light of experience gathered since the formation of the Economic and Monetary Union (EMU). The implications for the design of fiscal policy stemming from […]

Topic: European Macroeconomics & Governance Location: Danmarks Nationalbank
Read about event More on this topic

Past Event

Past Event

Can EMU survive a multi speed Europe?

On 6 April Bruegel, as in previous years, hosted the presentation of the Euro Yearbook, a collection of experts’ insights on the construction of the European Monetary Union through 2016.

Speakers: Pablo Zalba Bidegain, Maria Demertzis, Fernando Fernandez, Javier Méndez Llera, Karl Pichelmann and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 6, 2017
Read about event

Past Event

Past Event

Micro- and macro-based methods in assessing the impact of investment

This workshop will discuss methods for accurately evaluating the performance of public and private investment initiatives.

Speakers: Francesco Di Comite, Grégory Claeys, Zsolt Darvas, Helmut Kraemer- Eis, Áron Gereben, Robert P. Lieli, Simon Mizrahi, Amine Ouazad, Debora Revoltella, John K. Swales, Simone Signore, Natacha Valla, Marcin Wolski and Guntram B. Wolff Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 5, 2017
Read article More on this topic More by this author

Blog Post

B Coeuré - photo

Central bank communication in a low interest rate environment

Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at an event organised by Bruegel, Brussels, 31 March 2017

By: Benoît Coeuré Topic: European Macroeconomics & Governance Date: March 31, 2017
Read about event More on this topic

Past Event

Past Event

Central bank communication in a low interest rate environment

At this event, we are pleased to welcome Mr. Benoît Coeuré, Member of the Executive Board of the European Central Bank at Bruegel.

Speakers: Benoît Coeuré and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 31, 2017
Read article More on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

The UK’s Brexit bill: what are the possible liabilities?

The EU-UK financial settlement will be a complex part of the Brexit negotiations. Here the authors estimate that at end-2018 the EU will have outstanding commitments and liabilities totalling €724bn. Most of these relate to spending after the UK’s likely departure date, but are tied to commitments made during the UK’s EU membership.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: March 30, 2017
Read article More on this topic

Blog Post

Zsolt Darvas
DSC_0798
dsc_1000

Brexit bill negotiators must answer these 12 questions

Is Brexit a divorce, or is the UK leaving a club? This is the first question to answer as negotatiors discuss the key aspects of the EU-UK financial settlement. The authors present various scenarios, and find that the UK could be expected to pay between €25.4 billion and €65.1 billion. But the final cost can only be calculated after extensive political negotiations.

By: Zsolt Darvas, Konstantinos Efstathiou and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: March 30, 2017
Load more posts