Official figures show that the German economy shrank by 0.5% in the second quarter of the year compared with the first. This was the weakest performance in more than five years, according to the Federal Statistics Office.
The drop followed an expansion of 1.3% in the first quarter, the office said, revising down the first quarter figure from a previously reported 1.5%.
A string of recent data and sentiment indicators meant that economists had been fully expecting Germany's economy to have pulled back in the second quarter, and in fact many were expecting an even larger contraction.
Meanwhile, the French economy contracted by 0.3% in the second quarter of 2008, the statistics institute INSEE said. This was the first drop for nearly six years. Until now, INSEE had forecast that the economy would grow in the second quarter. The body also revised downwards its previous estimate for growth in the first quarter to 0.4% from 0.5%.
Separate figures from Germany showed that the annual rate of German inflation in July was 3.3%, a 15-year high.
In Spain, cabinet ministers interrupted their annual holidays today to approve a fresh package of 24 measures aimed at reviving a rapidly deteriorating economy.
Among the measures approved by the socialist government is the simplification of environmental plans for public works, the abolition of the wealth tax and cutting red tape for small and medium-sized businesses.
