Euro economy's slump first since 2009

Wednesday 15 February 2012 15.03
1 of 3
Italian economy slump shows challenges facing Monti government
Italian economy slump shows challenges facing Monti government
France shows growth, but Italy and Netherlands fall into recession
France shows growth, but Italy and Netherlands fall into recession
German economy's Q4 drop not as bad as feared
German economy's Q4 drop not as bad as feared

Official figures show that the euro zone economy shrank by 0.3% in the final quarter of last year, though it grew by 1.5% overall in 2011.

This followed growth of 0.1% in the third quarter of 2011, according to the Eurostat statistics agency.

The fall in activity - which had been expected by economists - was the first since the second quarter of 2009 at the height of the global financial crisis, when output shrunk 0.2%.

Earlier figures showed that the performance of the euro zone's two biggest economies - France and Germany - in the three-month period was not as weak as had been feared. But two other major economies, Italy and the Netherlands, fell into a recession.

The German economy, Europe's biggest, shrank by 0.2% in the final three months of 2011, as its exports were hit by the euro zone debt crisis.

The country's statistics office Destatis said foreign trade had a negative effect on the German economy in the period, but consumer spending also declined slightly. The German economy still grew by 3% over the whole of 2011, after record 3.7% growth in 2010.

But the French economy grew by 0.2% in the final quarter, according to its national statistics institute INSEE. This was a surprise, as most economists had expected the French economy to shrink in the three-month period.

Household consumption, the motor of France's economy, slowed slightly, but did not suffer as strong a decline as some economists had predicted.

Italy's economy contracted by a steeper than expected 0.7% in the fourth quarter of last year, throwing the country into a recession expected to last for much of this year.

Official statistics agency ISTAT reported that gross domestic product in the euro zone's third largest economy was down 0.5% year-on-year, also worse than expected.

GDP had fallen by 0.2% in the third quarter, and two consecutive quarters of decline in GDP constitute the technical definition of recession.

The latest data underscore the difficulties facing Mario Monti's government as it grapples with a shrinking economy dragged down by austerity measures and a debt crisis that threatens the whole euro zone.