Eurozone falls deeper into recession as Germany and France flounder

The eurozone 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 in the bloc.

It marked the eurozone’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%.

Economic output in the 17-country region fell 0.6% in the fourth quarter, EU statistics office Eurostat said yesterday, following a 0.1% 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% 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.

Germany contracted by 0.6% on the quarter, official data showed, its worst performance since 2009.

France’s 0.3% fall was also worse than expectations.

German exports fell significantly more than imports, but economists expect it to bounce back quickly.

While the ECB’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 may scuttle debt-cutting drives.

French prime Minister Jean-Marc Ayrault acknowledged on Wednesday that weak growth was putting his government’s deficit goal for 2013 out of reach.

The ECB has a projection for eurozone GDP growth in 2013 of -0.9-+0.3%. ECB vice president Vitor Constancio said he expected no major change to the forecasts in March.

— Reuters