RECESSION IMPACTS

Recession Impacts



Recession Impacts

Impact of the Global Recession on Europe

Since the start of the global recession in late 2008, almost all advanced economies experienced a reduction of output and increased unemployment. In the 27 member states of the European Union (EU- 27), real GDP decreased by 5.3 percent between the first quarter of 2008 and the second quarter of 2009: roughly a set back to the 2006 level. There are, however, large cross-country differences in both the timing and the depth of the crisis and subsequent recovery (Baumol, 2009, pp. 415).

The heterogeneity by which the 2008 crisis manifested itself in the different member states is illustrated in the following figure.

The left part of this figure shows the maximum decline in GDP for each country during the recession. The start of the recession is defined as the first quarter in which (seasonally adjusted) GDP declined for at least two subsequent quarters. The end of the recession is defined as the last quarter before GDP started to recover. We thus define the recession separately for each individual country. The figure also shows the change of GDP between the last available quarter (2010Q2) and the pre-crisis GDP level. This provides a first insight in the recovery phase. The effect of the recession differs in both depth and duration. For example, Ireland experienced a decline of GDP of 14.3 percent during the recession, which lasted from 2008Q1 until 2009Q4.

In Norway, the recession was shorter by four quarters (2008Q3-2009Q2) and was less intense, with a GDP decline of only 2.2 percent. In the second quarter of 2010, which is the last quarter for which data are available, almost all countries have started to recover from the crisis. Greece is the only country that was officially still in a recession back then, and Ireland's GDP started to decline again ...