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TheStreet Open House

Eurozone Recession Deepens As Germany Falters

By PAN PYLAS and DAVID RISING

BERLIN (AP) â¿¿ It was only a matter of time. With many of its debt-ridden euro partners in recession, Germany could only swim against the tide for so long.

Figures Thursday showed that output in Germany, Europe's largest economy, contracted by more than anticipated in the last three months of 2012. And it was the German drop that lay behind a deepening of the recession across the economy of the 17 European Union countries that use the euro.

Eurostat, the EU's statistics office, said the eurozone's economic output shrank by 0.6 percent in the final quarter of 2012 from the previous three-month period. The decline was bigger than the 0.4 percent drop expected in markets and the steepest fall since 2009, when the global economy was in its deepest recession since World War II.

There are hopes, though, that the fourth quarter of 2012 will mark the low point for the eurozone, and Germany in particular. Many economists are predicting that the eurozone recession may end in the first half of the year.

Nevertheless, Thursday's figures highlight the scale of the problems that have afflicted the single currency zone over the past year. Fears of a break-up, if not a collapse, of the currency dented confidence at a time when many governments were embarked on fairly severe debt-reduction programs.

In 2012 as a whole, the eurozone economy shrank by 0.5 percent, a stark contrast from the 2.2 percent growth recorded in the U.S. and the 1.9 percent in Japan.

"The fourth quarter's bigger-than-expected fall underlined the fact that, while sentiment towards the region has improved, the hard news on the economy remains distinctly weak," said Jonathan Loynes, chief European economist at Capital Economics.

The eurozone has contracted for three straight quarters â¿¿ a recession is officially defined as two quarters of negative growth. The eurozone is not alone in finding it increasingly tough as the year progressed but the fourth quarter figures confirm the region is struggling worse than others.

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