Eurozone recession to worsen despite rate cut

European Central Bank president Mario Draghi's latest rate cut for the struggling eurozone is unlikely to save the single currency bloc from a deepening recession, experts warned yesterday.

Mr Draghi cut borrowing costs to 0.5 per cent last week, and hinted yesterday the ECB could move again. But the latest snapshot of flagging activity among private-sector manufacturers and service firms remains consistent with a decline of 0.4-0.5 per cent for the eurozone economy overall, according to the financial data provider Markit. Its latest health check shows Germany's private sector joining those of France, Italy, and Spain in recession.

It comes as France's Economy Minister, Pierre Moscovici, prepares to meet his German counterpart, Wolfgang Schäuble, in Berlin today, with a potential two years' extra breathing space for France to cut its deficit to 3 per cent on the agenda. Mr Moscovici declared the "end of the dogma of austerity" at the weekend, but is likely to face opposition from German hardliners as September's elections loom.

Markit suggested that the eurozone's downturn had "gathered momentum again" in April after easing in January and February. Its chief economist, Chris Williamson, said: "The ECB has responded to the crisis by cutting interest rates to their lowest ever, but it seems difficult to believe that a mere 25 basis point cut from an already low level will have a material impact on an economy that is contracting so sharply."

Meanwhile the IMF praised Greece for progress in cutting government debt and improving competitiveness, but warned it needed to follow through on reforms to its economy and said the nation must do more to fight its "notorious" tax evasion.