After France and Germany, Europe’s two largest economies, shrank in 2012, the region fell further than expected into recession during the last three months of the year
The slip into recession marked the first full year since 1995 in which no quarter saw growth. GDP for 2012 fell by 0.5 percent, and economic output fell by 0.6 percent in the fourth quarter after a 0.1 percent decrease in the third quarter. The quarter-on-quarter drop of economic output was the highest since the first quarter of 2009 and worse than expected by economists, who predicted a 0.4 percent drop, according to Reuters.
Within the euro zone, only Estonia and Slovakia saw growth in the fourth quarter of 2012, though no data for Ireland, Greece, Luxembourg, Malta or Slovenia has been released yet. Germany shrunk by 0.6 percent in its worst economic performance since the height of the financial crisis, and France shrunk by 0.3 percent. The economies of the Netherlands and Austria fell by 0.2 percent over the fourth quarter, while Italy saw its sixth successive quarterly decrease in GDP. Spain, Europe’s fourth-largest economy, remained in deep recession after a 0.7 percent fall in the fourth quarter.
Germany’s exports, which drive its economy, fell substantially more than imports, though economists expect a quick recovery. Revisions to the data from France revealed that its output fell by 0.1 percent in the first and second quarters of 2012, indicating that the country has already gone through one recession in the past year, Reuters reports.
French Prime Minister Jean-Marc said on Wednesday that weak growth could prevent the government from reaching its 2013 deficit goal. Germany is expected to recover, and the region itself is also expected to improve during the first quarter of this year, yet it remains unclear whether growth has returned to the area.
Nick Kounis, an economist at ABN AMRO, said that subsiding fears regarding the break-up of the euro and increased availability of cheap credit has helped with the recovery of the euro zone.
“However, ongoing severe budget cuts, rising unemployment, bank deleveraging all point to the recovery being excruciatingly slow,” Kounis said, according to Reuters.