15-Nation Euro Zone Slides Into Recession

November 14, 2008

It is not official, but the 15-nation Euro zone has entered into its first recession since the debut of the single currency about 10 years back. The financial turmoil, economic slow down and domestic problems has led the countries to report a shrinkage of 0.2 percent in their gross domestic product in the third quarter. The second quarter had also reported a 0.2 percent decline. If the GDP falls for two consecutive quarters, the country is said to be in recession.

Economists predict that the scenario is going to worsen further. The first quarter of 2009 may witness deepening of the crisis.

“With manufacturing activity in a freefall due to an inventory overhang and plunging orders, services hit hard by the credit crisis and construction activity starting to contract, future growth prospects appear gloomy,” said Aurelio Maccario, chief euro-zone economist at UniCredit MIB in Milan.

The 27 European countries had so far escaped the recession owing to the growth in Eastern Europe. However, the growth in the second quarter shrank by 0.2 percent which made Euro zone to enter the recession. Two of the Europe’s largest economies, Germany and Italy had already slid into recession. France had narrowly escaped by registering a growth of 0.1 percent. The EU executive Commission foresees jobless rate to surge in coming few months. Households are already saving for the tough times as they worry about job losses. There has been a drastic cut in the spending and credit conditions have also tightened.

The auto industry is already ailing under the tightened economic conditions in the US and Europe. This is the first recession witnessed by the EU countries ever since the Euro was launched. “It will be the biggest recession since the ’80s” and will last through to the first half of next year, said Christoph Weil, an economist with Commerzbank AG in Frankfurt. He also expects a fall in the Euro currency.


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