A euro sign stands outside the European Central Bank’s headquarters in Frankfurt, Germany. Picture: REUTERS
A euro sign stands outside the European Central Bank’s headquarters in Frankfurt, Germany. Picture: REUTERS

BRUSSELS — The eurozone slipped deeper than expected into recession in the final three months of last year 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 0.5%. Economic output in the 17-country region fell 0.6% in the fourth quarter, statistics office Eurostat said on Thursday, 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 past quarter, although there are no figures available yet for Ireland, Greece, Luxembourg, Malta and Slovenia.

The big economies set the tone. Germany contracted 0.6% in the quarter, official data showed, marking its worst performance since the global financial crisis was raging in 2009. France’s 0.3% fall was also slightly worse than expectations.

Worryingly for Berlin, it was export performance — the engine 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 eurozone figures.

Back revisions to France’s figures showed its output fell 0.1% in each of the first and second quarters, meaning it has experienced one bout of recession in the past 12 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, its stronger members are in the grip of 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 this year out of reach.

Reuters