Eurozone fall raises global slump fears
Fears of a global recession heightened yesterday as the eurozone economy recorded its first contraction since the single currency was introduced ten years ago.
In the three months to June, gross domestic product (GDP) in the 15-country region fell by 0.2 per cent, according to Eurostat, the European Union’s statistical office.
The contraction marks a sharp turnaround from the first three months of the year when the economy expanded by 0.7 per cent.
Fears of a technical recession – two consecutive quarters of negative growth – are now widespread across the eurozone. The ECB left interest rates unchanged at 4.25 per cent last week, but Jean-Claude Trichet, president of the European Central Bank, warned that risks to economic growth were starting to materialise and that the second and third quarters would be “particularly weak”.
Confirmation that eurozone growth has gone into reverse comes just a day after the Bank of England slashed its forecast for UK growth to zero for the rest of this year.
Meanwhile, Japan, the world’s second largest economy, revealed its worst quarterly performance for seven years with a fall of 0.6 per cent between April and June.
In the US however, GDP rose by 0.5 per cent in the second quarter, a move many economists attributed to one-off measures to boost the economy.
Capital Economics economist Julian Jessop, expects eurozone growth to outpace the US again in 2009. “The economic and financial imbalances in the region as a whole are not as severe as those in the US or the UK,” he said.