The eurozone (EZ), the 17 nations that share the euro currency experienced a slumped 0.6pc in the quarter, the worst performance in over three years. The currency area has contracted for three quarters, and by 0.5% for the whole year. The economy is 1% smaller than in September 2011.
Economists had expected Germany to be hit by the bloc’s waning fortunes but the scale of decline came as a surprise. France, which shrank by 0.3%, and Italy, which was down 0.9%, a sixth straight quarterly decline, also performed worse than predicted.
Evidence of the extent of the eurozone’s troubles came as Japan also posted a shock 0.1% contraction in the three months to December; its third successive quarterly slump. The weak figures stoked speculation that new Prime Minister Shinzo Abe would step up his efforts to stimulate the economy.
The surprisingly poor eurozone data caused the currency to fall 0.9% against the dollar to $1.3328 in early trading. In Europe, Anita Paluch, a sales trader at Gekko Capital Markets, said: “It is kind of disappointing that Germany, which had shown so much resilience, is now showing signs of suffering from the debt crisis.”
Germany’s economic minister Philipp Roesler said the low point had been passed – an argument with which many economists agreed. “High uncertainty in Europe is putting the brakes on investment and economic activity in Germany,” he said.
“But this weakness is only temporary. During the course of the year, the German economy will find its way back to growth. Current indicators, such as business surveys, confirm this.” For 2012 as a whole, Germany grew by 0.7%.
In France, ministers said they would review their 0.8% growth forecast for this year after the slump in the last three months of 2012, but refused to contemplate more austerity if it meant deficit reduction targets were missed. (telegraph.co.uk)