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French and German economies contracted at end of 2012 Eurozone recession deepened at end of 2012
(about 1 hour later)
The German and French economies both contracted in the final three months of 2012, official figures have shown. The eurozone recession deepened in the final three months of 2012, official figures show.
Germany - the eurozone's largest economy - saw its gross domestic product (GDP) shrink by 0.6% as exports declined. The economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast.
That was the deepest contraction since the first three months of 2009 - the height of the financial crisis. This followed news that Germany, France and Italy all saw bigger-than-expected contractions in the period.
Germany, the eurozone's biggest economy, with a fall of 0.6%, saw the deepest contraction since the height of the financial crisis.
It was hit by a sharp decline in exports.
The German statistics office said: "Comparatively weak foreign trade was the decisive factor for the decline in the economic performance at the end of the year: in the final quarter of 2012 exports of goods declined significantly more than imports of goods."
The French economy shrank by 0.3% in the fourth quarter, while Italy showed 0.9% contraction for the period.The French economy shrank by 0.3% in the fourth quarter, while Italy showed 0.9% contraction for the period.
Italy has been in recession since mid-2011. Prime Minister Mario Monti has introduced severe austerity measures to cut its debt and reassure markets that it is a safe country to lend to. An election is due on 24 February. A recession is usually defined as two consecutive quarters of contraction.
Some analysts have predicted France is heading for a recession - usually defined as two consecutive quarters of contraction. 'Outlook promising'
However, France's central bank recently forecast that the economy would expand in the first three months of 2013. There are diverging views on the prospects for the different countries in the region.
Economists remain upbeat about the outlook for Germany.
"This is a temporary period of weakness in the German economy rather than the beginning of a long period of stagnation or even a recession " said Andreas Rees, chief German economist at the bank Unicredit.
He added: "The outlook is very promising. The chances that the economy will return to growth at the beginning of this year are very good."
That sentiment has been backed up by recent surveys. January's closely watched business confidence survey for Germany hit its highest level since before the eurozone crisis.
Eurozone purchasing managers' index (PMI) surveys for January also indicated the worst may be over. Germany, Spain and Italy all showed signs of stabilisation - although in France the downturn deepened.
That is part of the reason why many analysts have predicted that France is heading for a recession.
However, France's central bank recently forecast that the economy would just manage to grow in the first three months of 2013.
'Growth re-thought''Growth re-thought'
The latest GDP number means that the French economy barely grew in 2012. The latest GDP number means that the French economy barely grew at all 2012.
French Finance Minister Pierre Moscovici admitted on French radio that the government may need to rethink its growth forecast of 0.8% for 2013.French Finance Minister Pierre Moscovici admitted on French radio that the government may need to rethink its growth forecast of 0.8% for 2013.
"We note that the figure for 2012 is not good, around zero, and so we also know that growth for 2013 will have to be re-thought.""We note that the figure for 2012 is not good, around zero, and so we also know that growth for 2013 will have to be re-thought."
He added that he did not want to "condemn the country to recession" by adding "austerity to the difficulties of today".He added that he did not want to "condemn the country to recession" by adding "austerity to the difficulties of today".
French President Francois Hollande is trying to make France more competitive by slashing government spending and relaxing labour regulations.French President Francois Hollande is trying to make France more competitive by slashing government spending and relaxing labour regulations.
'Outlook promising' Italy has been in recession since mid-2011. Prime Minister Mario Monti has introduced severe austerity measures to cut its debt and reassure markets that it is a safe country to lend to. An election is due on 24 February.
The German statistics office said: "Comparatively weak foreign trade was the decisive factor for the decline in the economic performance at the end of the year: in the final quarter of 2012 exports of goods declined significantly more than imports of goods."
But economists remain upbeat about the outlook for Germany.
"This is a temporary period of weakness in the German economy rather than the beginning of a long period of stagnation or even a recession " said Andreas Rees, chief German economist at the bank Unicredit.
He added: "The outlook is very promising. The chances that the economy will return to growth at the beginning of this year are very good."
That sentiment has been back up by recent surveys. January's closely watched business confidence survey for Germany hit its highest level since before the eurozone crisis.
Eurozone purchasing managers' index (PMI) surveys for January also indicated the worst may be over. Germany, Spain and Italy all showed signs of stabilisation - although in France the downturn deepened.
The growth figure for the whole eurozone is out later and is expected to show the recession in the region worsening. GDP is forecast to contract by 0.4% - which would be the third consecutive quarter of contraction.
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