Euro zone economy shrinks, raising recession fears

GlobalPost

The economy of the 17-member euro zone contracted by 0.3 percent in the final three months of 2011, official figures released Wednesday show, raising fears that the currency bloc may fall into a mild recession.

The decline was the first slump since the second quarter of 2009 at the height of the global financial crisis, when output contracted 0.2 percent, Reuters reported.

Italy and the Netherlands – two of the euro zone’s biggest economies – fell into recession, with both economies shrinking by 0.7 percent in the final quarter, their second consecutive quarter of economic contraction.

Italy has now been shrinking for six months.

Today’s figures from Eurostat, the EU’s statistics office, also showed that Germany had experienced its first negative quarter since 2009. GDP dropped 0.2 percent due to a slowdown in exports caused by the ongoing debt crisis sweeping across its European neighbours, denting their demand for German goods, according to Sky News.

However France saw surprise growth of 0.2 percent at the end of 2011, attributed to healthy export growth, the BBC reported.

The figures will come as a boost to President Nicolas Sarkozy, who is expected to announce this evening that he will run again for office in April elections, according to the Agence France Presse.

"Each of the three main components of the economy – foreign trade, household consumption and investment – had a positive contribution in the last quarter of 2011," Finance Minister François Baroin said in a statement.

"This strengthens the government's forecast for 0.5 percent [growth] this year."

The overall euro zone economy grew by 1.5 percent in 2011, the Associated Press reported. 

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