Eurozone Slips into Recession

New EU figures show that the Eurozone economy shrank by 0.2% in the third quarter of this year. This follows a 0.2% contraction in the 15-nation economic zone in the previous quarter from April to June. Two consecutive quarters of negative growth are classified as a recession.

The news follows data indicating that Germany and Italy, two of the biggest Eurozone economies, are already in recession. Germany is the manufacturing dynamo of the European economy. When there are problems there, it pulls the rest of the Eurozone down with it. This is the first recession seen since the Euro’s creation in 1999.

Analysts forecast further gloom ahead. Further quarters of negative GDP growth are expected, until the third quarter of 2009. Current forecasts indicate that the Eurozone region will shrink by 1% next year. The gloomy forecasts are founded in uncertainty relating to the recent financial turmoil on money markets and slowing exports exacerbated by the strengthening euro against the dollar and pound.

Analysts are now believe that a sharp decline in household spending and a property crisis are likely to push the Spanish economy into recession in the next quarter. Meanwhile, the wider European Union (EU), made up of 27 nation states, is also in danger of falling into a recession with the region’s output shrinking by 0.2% in the third quarter.

The member states of the Eurozone are Germany, France, Italy, Spain, Belgium, the Irish Republic, the Netherlands, Luxembourg, Portugal, Slovenia, Malta, Greece, Austria, Finland and Cyprus.