Germany and France showed resilience as the main pillars shoring up the eurozone, notching up firm growth in the third quarter new data showed on Tuesday amid clouds of gloom about the EU and global economies.
But EU data showed that third-quarter growth in the eurozone as a whole was just 0.2 percent. And the German ZEW confidence indicator was at the lowest level for three years.
Meanwhile bond market pressure on France and Spain increased.
ith both the European Commission and OECD warning of an imminent slowdown and the IMF now worried about China, as well, the global gloom looks set to thicken in the coming months, analysts say.
Germany and France both showed resilience as the eurozone's economic powerhouses in the third quarter, clocking up solid growth of 0.5 percent and 0.4 percent respectively in the period from July to September, according to official data released Tuesday.
That was welcome news given the unexpectedly abrupt slowdown seen in the preceding three months, and the statisticians noted that in both countries household spending, in particular, had bounced back strongly.
But the data may not be enough to dispel the overall gloom.
Already on Monday, the Organisation for Economic Co-operation and Development in Paris warned of increasing signs of slowdown in most OECD countries and in major non-member countries.
That came just days after the EU Commission in Brussels warned that Europe could tip back into recession over the course of 2012 due to a "vicious circle" of government debt, vulnerable banks and collapsed spending.
Similarly worrying on Tuesday was an analysis of China's financial system by the International Monetary Fund, which warned that the world's second-largest economy is at risk from bad loans, booming private lending and sharp falls in property prices.
Analysts said the seemingly favourable third-quarter growth data in Germany and France may be the last pieces of good news for quite a while.
"The country GDP figures released so far suggest that the eurozone as a whole managed a modest quarterly expansion in 0.2-0.3 percent in the third quarter," said Jonathan Loynes, chief European economist at Capital Economics in London.
"But the key point is that this is all history. Both forward-looking indicators and the more timely hard data... suggest that the eurozone economy is likely to drop back into recession in the fourth quarter and beyond," Loynes said.
"We have pencilled in a well-below consensus contraction of 0.5 percent in 2012 as a whole but the risks even to that forecast are shifting rapidly to the downside," Loynes said.
European stocks were lower on Tuesday as gains seen the previous day were erased by new caution over whether Europe's leaders can really tame the eurozone debt crisis.
In Italy, the new leader Mario Monti is scrambling to form a new cabinet to lead the country out of an unprecedented crisis and the toxic mix of a 1.9-trillion-euro public debt mountain, an extremely low growth rate and high bond rates are keeping markets anxious.
Greece also has a new leader, Lucas Papademos, former deputy chief of the European Central Bank
But while the new governments led by reform-minded economists were seen as a good starting point for reforms, "implementation will at best take time," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"Markets are faced with a medium-term outlook full of risk that economic reforms will not survive the political process," he told Dow Jones Newswires.
Economists believe the economy will slow or even contract slightly in the fourth quarter as the eurozone debt crisis and the turbulence on the financial markets take their toll.
"Today's numbers are as good as it gets for the German economy, at least for a short while," said ING Belgium economist Carsten Brzeski.
Berenberg Bank senior economist Christian Schulz agreed.
"This is likely to be the last quarter of significant growth for a while as the debt crisis is leading the economy to slip into a mild recession in the winter," he said.
Thomas Harjes at Barclays Capital said he expected "a GDP contraction in this year's final quarter as the sovereign debt crisis in the euro area is increasingly weighing on domestic demand, especially investment.
"For early 2012, we forecast modest expansion in German economic activity, driven by more robust US and Asian demand, but this remains a close call and requires that the debt crisis is contained," Harjes said.