Eurozone swings closer to economic recession
The eurozone's economy has slipped further towards recession, with fresh output figures pointing to an economic downturn in the 15-strong zone as well as in the whole of the European Union, while inflation remains at a record high.
According to early predictions by Eurostat, the EU's statistical office, gross domestic product (GDP) in the euro area dropped by 0.2 percent during the second quarter of 2008. This makes it the very first time that the monetary bloc's economy declined since the launch of euro.
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Europe's economy is shrinking while prices remain at record highs (Photo: European Commission)
Similarly, the GDP for the whole of the EU shrank by 0.1 percent during the same period, with the worst performance recorded in the Baltic states of Estonia and Latvia.
The gloomy forecasts – published on Thursday (14 August) - have reinforced concerns about the European economy moving closer to recession, with both Germany and France as the two biggest countries showing signals of an economic slow-down.
The German economy dropped by 0.5 percent - which was less than analysts had predicted – while France's shrunk by 0.3 percent.
Amelia Torres, European Commission spokeswoman for economic and monetary affairs, refused to speculate on recession fears and suggested that the latest figures were of no surprise to the EU executive, referring to unexpectedly high growth rates in the first quarter of 2008.
"I think it's a bit exaggerated to use that word," she told reporters in Brussels. But she admitted that "the signs are not really very good for the future".
According to eurozone figures, no eurozone country is yet officially in recession – seen as two consecutive quarters of economic decline – but within the whole of the EU, Estonia has officially slipped in recession.
Along with the declining growth, inflation in the eurozone remained at a record high of 4 percent in July, unchanged from June. A year earlier the rate was 1.8 percent.
