Europe facing another crisis

Published 12:00 am Saturday, August 30, 2014

PARIS — Six years after being struck by economic crisis, Europe is facing a fresh downturn, with few new ideas on the table for reigniting growth and deepening political divisions over the austerity policies that many blame for worsening the malaise.

Even as the U.S. economy rebounds from its worst recession since the 1930s, Europe is heading in the opposite direction. A halting recovery that took hold in the 18-nation euro currency bloc in the past year has now gone into reverse as Germany, France and Italy, its three largest economies, stumble anew. Some analysts say the region could be headed for another full-scale recession, a slowdown that could have ramifications for the U.S. economy.

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Germany, the Continent’s economic engine, contracted in the second three months of the year, while the bloc of 18 European Union nations that use the euro failed to grow at all. Political and financial instability related to Russia’s confrontation with Ukraine and the effects of escalating economic sanctions between Europe and Russia have further clouded the economic outlook.

Unemployment has fallen only marginally in Europe, to 11.5 percent in July from a peak of 12 percent last year, according to figures released Friday.

“This is a major red light” for Europe, said Jean-Paul Fitoussi, a professor of economics at the Institut d’Études Politiques de Paris. “We need to change the direction of policy to avoid a situation with potentially worrisome consequences for society and politics.”

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