The eurozone is teetering on the edge of recession even as the dominant German economy continues to expand, official figures showed yesterday.
Output across the 17-member currency bloc fell by 0.2 per cent in the second quarter of 2012, having registered zero growth in the first quarter. Another quarter of negative growth will put the eurozone back into a technical recession and mean that the single-currency area has registered no growth for a full year.
Contraction is exacerbating the eurozone crisis as struggling nations on the continent's southern periphery struggle to cut budget deficits and curb rising unemployment.
The latest flash GDP estimate from the Eurostat agency shows that output continued to sink in Italy, falling by 0.8 per cent in the second quarter. The Spanish economy contracted by 0.4 per cent. The worst performer was the Portuguese economy, where output plunged by 1.2 per cent over three months. Separately, Greece reported on Monday that its GDP was a full 6.2 per cent smaller than the second quarter of 2011.
City analysts expect another fall in eurozone GDP in the third quarter of the year, despite a new commitment this month from the European Central Bank (ECB) to buy up bonds of struggling member states. "It is clear that eurozone GDP will register a larger contraction in Q3," said Janet Henry of HSBC. "This will raise even more questions about whether eurozone member states can realistically expect to meet their fiscal targets."
However, the overall picture was boosted by a slightly stronger than expected performance from the eurozone's largest economy, Germany, which grew by 0.3 per cent in the second quarter, on the back of strong public consumption and decent exports. Marcel Alexandrovich, of Jefferies, noted that, since the advent of the euro in 1999, Germany had grown by more than the rest of the bloc and said that fact should enable the country's leaders to make the public case for propping up weaker members. "Germany really is a relative 'winner' from the introduction of the single currency," he said.
The French economy was flat over the quarter, the third in which it has had no growth. And the Finnish economy went into a sharp reverse, falling 1 per cent.