Greece slips back under strain of austerity plan

The Greek economy shrank again in the second quarter, it was revealed yesterday, amid further signs that the pace of recovery across the eurozone is faltering. The European Central Bank has issued a caution that the prospects for a sustained revival cannot rely on exports.

Industrial output in the 16-member eurozone slipped by 0.1 per cent in June, leaving overall industrial sector growth up by 2.5 per cent over the second quarter as a whole, the same as in the first three months of this year. Germany led the way, boosted by exports, especially of capital goods.

At home, however, the eurozone still faces an uncertain future. The ECB said: "The sustainability of the recovery in global and euro-area trade will depend critically not only on a further strengthening of private demand, but also on the robustness and health of the global financial system."

Last week the President of the ECB, Jean-Claude Trichet, said the euro-zone economy would be "much less buoyant" in the second half of the year.

In Greece, which faces the biggest challenge of all, official data revealed that GDP fell by 1.5 per cent in the quarter, and that unemployment hit 12 per cent, both worse than feared.