Euro zone: deep recession

Annika Breidthardt and Vicky Buffery Berlin, Paris

The euro zone slipped deeper into recession in the last three months of last year after its largest economies, Germany and France, shrank markedly at the end of the year.

It marked the area’s first full year in which no quarter produced growth, extending back to 1995.

Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, the EU’s statistics office, Eurostat, said yesterday, following a 0.1 percent third-quarter drop.

It was the steepest decline since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a poll of 61 economists.

For the year as a whole, gross domestic product (GDP) in the euro zone contracted by 0.5 percent.

Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there were no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.

The big economies set the tone. Germany contracted by 0.6 percent on the quarter, data showed, marking its worst performance since the global financial crisis was raging in 2009. France’s 0.3 percent fall was also slightly worse than expectations.

Worryingly for Berlin, it was export performance – the motor of its economy – that did most of the damage, although economists expect it to bounce back.

“In the final quarter of 2012 exports of goods declined significantly more than imports,” Germany’s statistics office said.

The euro hit a session low against the dollar after the weaker-than-forecast German reading, and fell again after the release of full euro zone data.

Back revisions to the French figures showed its output fell by 0.1 percent in each of the first and second quarters of 2012, meaning it has already experienced one bout of recession in the last 12 months. – Reuters