The 17-nation euro-zone sank further into recession in the last three months of 2012 as the debt crisis continued to exact a heavy price, official data showed yesterday. The eurozone economy shrank 0.6 percent in the fourth quarter of 2012 compared with the third quarter when it contracted 0.1 percent, the Eurostat data agency said, confirming initial estimates given in February.
For the full 27-member European Union, the economy was 0.5 percent smaller in the fourth quarter after a marginal gain of 0.1 percent in the third, Eurostat said. A recession is counted as two consecutive quarterly economic contractions.
Compared with fourth quarter 2011, the euro-zone economy was down 0.9 percent and the EU 27 off 0.6 percent. Among the major economies, European powerhouse Germany shrank 0.6 percent in the fourth quarter after a gain of 0.2 percent in the third and France slipped 0.3 percent after growth of 0.1 percent.
Noneuro Britain lost 0.3 percent after sharp growth of 1.0 percent in the third quarter, boosted by the London Olympics. Among the fourth quarter best performers were Estonia, which grew 0.9 percent and Lithuania, up 0.7 percent, while bailed-out Portugal was the weakest, with its economy shrinking 1.8 percent. Falling investment and consumers’ reluctance to spend even at Christmas were behind the Euro-zone’s slide deep into recession in the last three months of 2012, according to a second official estimate yesterday. Economic output from the 17 nations sharing the euro fell 0.6 percent in the fourth quarter of 2012, EU statistics agency Eurostat said, confirming an earlier reading and giving a more detailed breakdown. “This was the worse quarter in the recessionary cycle,” said Mads Koefoed, an economist at Saxobank. “The outcome of the Italian election increases uncertainty, but euro zone growth should come back towards the end of this year,” he said.
The data pointed to the vicious circle at the centre of the Euro-zone’s economic malaise. Governments are cutting spending, prompting businesses to freeze investment and lay off staff, in turn leaving households in no state to spend or provide the growth needed to reduce debt.While backward-looking, the numbers may also influence a monthly meeting of the European Central Bank’s Governing Council today. The bank is not expected to cut rates this week to below 0.75 percent, but a growing number of economists see a reduction in the cost of borrowing at some point this year, partly because inflation is no longer a threat in the euro-zone.
From Kuwait Times