Germany Keeping The Eurozone Afloat

The Eurozone’s economic growth was sluggish in the fourth quarter of 2015, posting a weak 0.3% growth for the secondquarter in a row. While it did match analysts’ forecast of 1.5% growth on the year, the outlook for 2016 isn’t looking so hot with Italy’s recovery waning.

The southern European country’s GDP grew just 0.1% in the last three months of the year, missing the estimate of 0.3% by economists.

“Italy is struggling to emerge from the great recession and despite some encouraging signs in the first part of 2015, growth lost momentum in the second half,” says Lorenzo Codogno, a professor at the London School of Economics.

To make matters worse, Greece’s economy shrank 0.6% in the fourth quarter, following a 1.4% contraction the quarter prior.

Germany remains the steadying hand

The Eurozone’s largest economy came through once again for its peers, growing its domestic product by 0.3% in the last three months of the year, offsetting weaker growth elsewhere. In the face of an economic slowdown in China and turbulent financial markets across the globe, the country managed to meet economist expectations through higher consumer and government spending, the latter of which was up “markedly” in the final quarter of the year. The main reason for that is likely the influx of over 1 million refugees during the year, with the government spending money big to accommodate and integrate newcomers.

Despite Germany’s steady influence over the years of the Eurozone’s shaky recovery — its economy shrank only three times in the 27 quarters since the financial crisis hit in 2009 — it may find itself in a more challenging environment in 2016. With economic growth weakening around the world, political uncertainty and the current refugee crisis, it’s not going to be an easy task to maintain its current momentum.

Keep in mind, however, that its stable labor market, increasing wages, low interest rates and falling energy prices will keep Germany in a much better situation than the rest of the Eurozone. But because of the nature of the Eurozone, Germany will continue to be dragged down by its neighbors who are unable to keep up with its recovery.