Tag Archives: CEPR

One Recession or Many? Double-Dip Downturns in Europe

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The recent release of a revised set of GDP statistics by Britain’s Office for National Statistics showed that growth had not quite, as previously thought, been negative for two consecutive quarters in the winter of 2011-12.  The point, as it was reported, was that a UK recession (a second dip after the Great Recession of 2008-09) was now erased from the history books — and that the Conservative government would take a bit of satisfaction from this fact.    But it should not.    

Similarly, in April of this year, Britain was reported to have narrowly escaped a second quarter of negative growth, and thereby escaped a triple dip recession.   But it could have saved itself the angst.

The right question is not whether there have been double or triple dips; the question is whether it has been the same one big recession all along.  As the British know all too well, their economy since the low-point of mid-2009 has not yet climbed even halfway out of the hole that it fell into in 2008:  GDP (Gross Domestic Product, which is aggregate national output) is still almost 4% below its previous peak, as the first graph shows.   If the criteria for determining recessions in European countries were similar to those used in the United States, the Great Recession would probably not have been declared over in 2009 in the first place.   

Recent reports that Ireland entered a new recession in early 2013 would also read differently if American criteria were applied.  Irish GDP since 2009 has not yet recovered more than half of the ground it lost between the peak of late-2007 and the bottom two years later.  Following US methods, the end would not yet have been declared to the initial big recession in Ireland.   As it is, a sequence of tentative mini-recoveries have been heralded, only to give way to “double-dips.” 

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