Euro zone GDP decline worst since Q1 2009



REUTERS

Published — Friday 15 February 2013

Last update 15 February 2013 12:39 am

| نسخة PDF Print News | A A

BRUSSELS: The euro zone slipped deeper than expected into recession in the last three months of 2012 after its largest economies, Germany and France, shrank at the end of a wretched year for the region.
It marked the currency bloc’s first full year in which no quarter produced growth, extending back to 1995. For the year as a whole, gross domestic product (GDP) fell by 0.5 percent
Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, EU statistics office Eurostat said, following a 0.1 percent output drop in the third.
The quarter-on-quarter drop was the steepest since the first quarter of 2009 and more severe than the average forecast of a 0.4 percent drop in a Reuters poll of 61 economists.
Within the zone, only Estonia and Slovakia grew in the last quarter of the year, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.
The big economies set the tone.
Germany contracted by 0.6 percent on the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009.
France’s 0.3 percent fall was also slightly worse than expectations.
Worryingly for Berlin, it was export performance — the motor of its economy — that did most of the damage, declining significantly more than imports, although economists expect it to bounce back quickly.
The euro hit a session low against the dollar after the weaker than forecast German reading and dropped again after the release of full euro zone figures.
Back revisions to the French figures showed its output fell by 0.1 percent in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.
While the European Central Bank’s pledge to do whatever it takes to save the euro has taken the heat out of the bloc’s debt crisis, even its stronger members are gripped by an economic malaise that could push debt-cutting drives off track.
French Prime Minister Jean-Marc Ayrault acknowledged for the first time on Wednesday that weak growth was putting his government’s deficit goal for 2013 out of reach.
Resilient Germany is expected to rebound and the bloc as a whole is expected to have improved in the first quarter, as suggested by a pick-up of factory orders in December, but it is not yet clear if growth has returned.
Nick Kounis, economist at ABN AMRO, said the decline of fears the euro could break apart and cheap credit had sown the seeds for the recovery.
“However, ongoing severe budget cuts, rising unemployment, bank deleveraging all point to the recovery being excruciatingly slow,” he said, adding the strong euro was also a threat.
The ECB has a wide-ranging projection for euro zone GDP growth in 2013 of between -0.9 and +0.3 percent. ECB Vice President Vitor Constancio said on Tuesday he expected no major change to the forecasts in March.
Dutch GDP dropped 0.2 percent over the quarter, keeping it in recession, and the Austrian economy shrank at the same rate.
For the more embattled members of the currency bloc, matters are worse. The greatest reported decline was in bailed-out Portugal, down 1.8 percent.
Italy suffered its sixth successive quarterly fall in GDP — this time by a sharp 0.9 percent — putting it into a longer slump than it suffered in 2008/2009.
Its recession has been deepened by austerity measures that outgoing Prime Minister Mario Monti introduced to stave off a debt crisis.
With an election due on Feb. 24/25, all sides in a three-way race between Monti’s centrist bloc, Pier Luigi Bersani’s center-left coalition and Silvio Berlusconi’s center-right are pledging to cut taxes to try to kickstart economic growth.
Spain, the euro zone’s fourth largest economy, released figures two weeks ago which showed it remained deep in recession after a 0.7 percent contraction in the fourth quarter.
Madrid is also pressing on with austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.
There are signs that countries like Spain are starting to benefit from internal devaluations — marked by wage falls and job losses aimed at making companies leaner and more productive.
The ECB predicts the euro zone will pick up later in the year although its currency, if it keeps strengthening, could quickly snuff out any of those hard-won competitive advantages for its high debt members.
More recent data for January have already suggested some upturn in the first months of 2013, in the bloc’s stronger members at least, and if improvement comes it is expected to be seen in Germany first.

What's happening around Saudi Arabia

Arab News Editor in Chief Mohammed Fahad Al-Harthi hosted a banquet for editors in chief of local print and online publications, Shoura Council members, representative of the Ministry of Culture and Information, prominent writers and columnists in Je...
JEDDAH: Health workers from Riyadh’s National Guard hospital would not be allowed to perform Haj this year, or work at the holy sites, the Ministry of Health has announced.Hail Al-Abdali, head of the ministry’s infection control unit, was reportedly...
RIYADH: Construction on the multibillion-riyal Riyadh Metro is well under way with several giant drilling machines working overtime to ensure that underground tunnels for the project are completed on schedule.The Arriyadh Development Authority (ADA)...
JEDDAH: Officials from the Saudi Ministry of Haj have been holding meetings with their counterparts from Arab and South Asian nations in preparation for this year’s pilgrimage.Abdulrahman bin Ali Al-Nafei, assistant deputy minister of Haj and in char...
RIYADH: Four polling stations in Tabuk have stopped registering voters for the Dec. 12 municipal elections in the region.Ibrahim bin Ahmed Al-Ghabban, undersecretary at the Tabuk municipality and member of the local committee for the election of a mu...
JEDDAH: Many prospective candidates running for seats on the country’s municipal councils have been using Twitter to boost their election campaigns.Many have been using religious expressions in their messages, such as “In the name of God,” and “If He...
DAMMAM: There has been a flurry of activity on the Kingdom’s highways as service companies race to meet the Jan. 19 deadline for the revamp of dilapidated gas stations.The Ministry of Municipal and Rural Affairs has previously handed out rehabilitati...
RIYADH: Saudi Arabia and Germany have signed an agreement on mutual protection of classified information to provide a legal framework for enhanced cooperation in the defense sector. The pact was signed by Mohammed bin Abdullah Al-Aish, assistant mini...
JEDDAH: While Saudi Arabia has now arrested the main suspect in the 1996 bombing of the Alkhobar Towers residence at an American military base in the country, the hunt continues for three others, according to reports in the local media on Thursday.Ah...
AL-AHSA: Located in the western part of Al-Qara Mountain is a workshop for the pottery industry, molding clay in plastic forms that are given permanency by the use of intense heat. This art form became one of the major attractions in Al-Ahsa Archaeol...
RIYADH: A newborn baby boy, who appeared to be just hours old, was found lying in the grass, covered with a blanket, in an abandoned field in Jazan on Tuesday morning.According to local residents, a family passing by heard the baby crying and rushed...
TAIF: Several schools in Taif have recorded a lack of schoolbooks for primary and intermediate classes for the first time in 15 years, a local publication reported.This has resulted in many boys and girls not turning up for classes. A source said tha...
RIYADH: Justice Minister Walid Al-Samaani said that directives from Custodian of the Two Holy Mosques King Salman to protect the rights of citizens and public properties are being strictly implemented.“All legal measures are being taken to hold accou...
RIYADH: Najran region has retained its veritable unique cultural heritage and attractions, which include old mud buildings constructed some 300 years ago.While the laid-back ambience in many areas is gone due to modern life brought about by contempor...
RIYADH: Saudi Arabia, under Custodian of the Two Holy Mosques King Salman’s wise leadership, has witnessed an accelerated pace of economic growth with improved living standard of its people, says Uzbekistan Ambassador to Saudi Arabia Alisher Kadirov....

Stay Connected

Facebook