Published November 15, 2012
BERLIN/PARIS – Germany and France each grew by 0.2 percent in the third quarter but with the euro zone's debt-laden members suffering deeply, the currency bloc as a whole is likely to have slid into recession.
The quarterly performance of Europe's dominant economy reported on Thursday was in line with forecasts and analysts said it could not defy gravity for much longer. The French economy surprised on the upside, having been expected to post no growth at all after a revised 0.1 percent fall in the second quarter.
"That was the last good number from Germany for the time being. The German economy will probably shrink somewhat in the fourth quarter given that orders have been falling for the last year and the business climate ... has caved in," said Joerg Kraemer, chief economist at Commerzbank.
"That is due to the uncertainty caused by the euro zone crisis. I don't expect the German economy to return to decent growth rates until the middle of next year."
Economists expect EU statistics office Eurostat to say that the bloc's output shrank 0.2 percent in the third quarter, as it did in the second quarter. Business surveys point to a deeper decline.
That would push the 9.4 trillion euro ($12 trillion) economy, which generates a fifth of global output, officially in recession. Italy and Spain have been contracting for months and Greece -- where the euro debt crisis began -- is suffering an outright depression.
The figures will be released at 5. a.m EDT.
Hopes for a recovery next year are also fading, with the European Commission saying the economy will flatline in 2013.
A rebound in the euro zone could be vital for the rest of the world as the United States faces a political battle over its finances and China struggles with the impact of the crisis on their companies' ability to grow and prosper.
Figures out earlier this week showed the Portuguese economy shrank 0.8 percent quarter-on-quarter while Greece tumbled further, casting doubt on whether Athens and its lenders can come up with a credible plan to put its finances back on track.
Spain, which has kept the euro zone on tenterhooks over a decision on whether or not to seek help from the euro zone rescue fund, is also in recession. It contracted 0.3 percent in the third quarter.
With little prospect of better times ahead, the threat of a public backlash cannot be dismissed.
Millions of workers went on strike across Europe on Wednesday to protest the government spending cuts they say are driving the region into a deeper malaise but which Germany and the Commission say are crucial to healing the wounds of a decade-long, credit-fuelled boom.
But the European Central Bank's pledge to buy euro zone government bonds in potentially unlimited amounts, should a country first seek help from the rescue fund, has diminished any threat of a euro zone calamity.
(Writing by Mike Peacock. Editing by Jeremy Gaunt.)