May 24, 2024

Euro Watch: Data Show Weakening in Euro Zone Economy

The data comes in a week when euro zone finance ministers are due to confer by telephone about further aid to the faltering Greek economy, and heads of the major global economic agencies are holding meetings with the leaders of France and Germany.

Spain’s gross domestic product contracted by 0.3 percent in the third quarter from the second quarter, the National Statistics Institute reported from Madrid.

The Spanish economy has now contracted for four consecutive quarters. A collapse real estate prices after the 2008 financial crisis and austerity measures to balance the public sector budget have inflicted severe pain on the country, driving unemployment to 25 percent.

In Nuremberg, the Federal Labor Agency said the number of Germans without jobs rose in 20,000 after seasonal adjustment, leaving the unemployment rate at 6.9 percent, unchanged from September.

“The weaker economic development is making itself noticeable in the labor market,” Frank-Jürgen Weise, director of the German Federal Employment Agency, told a press conference in Nuremberg. But he added that “overall, the labor market is showing itself to be robust and in fine condition.”

Eckart Tuchtfeld, an economist with Commerzbank in Frankfurt, noted that, perhaps more worryingly, the number of employed fell in September for the first time since early 2010.

“The ‘labor market miracle’ many observers had proclaimed is likely to continue taking a breather for now, in view of the poor economy,” Mr. Tuchtfeld wrote. “Only in the second half of 2013 do we expect the trend to point up again.”

The Spanish and German gloom were underscored by a report from the European Commission, which said in Brussels that its index of business and consumer sentiment fell 0.7 point to 84.5 this month from a revised 85.2 points in September.

An index value below 100 shows more respondents are pessimistic than optimistic.

“Marked decreases” in sentiment in the euro zone’s industrial and construction sectors outweighed improvement in retail, though service sector and consumer confidence were stable, the commission, said, though it noted a hopeful sign in that the rate of decline in the indexes was slowing.

Sentiment in the 27-nation European Union was “broadly stable,” the commission said.

The decline in sentiment shows the 17-nation euro zone began the fourth quarter “on a very weak note,” Jennifer McKeown, an economist in London with Capital Economics, wrote in a note. She said the sentiment data were “consistent with annual contractions in euro-zone G.D.P. of around 2.5 percent. That implies very steep quarterly falls in G.D.P. in the next few quarters.”

She also predicted the euro zone economy would shrink by about 2.5 percent next year.

More than three years after Greece’s disclosure that it had been fudging its government finance statistics, touching off a run on the sovereign debt of several euro zone governments, the region’s crisis has become a grinding, chronic affair.

Chancellor Angela Merkel will hold talks in Berlin on Tuesday with the leaders of the Organization for Economic Cooperation and Development, the International Monetary Fund, the World Bank, the World Trade Organization and the International Labor Organization.

The leaders were arriving in Berlin from Paris, where they held talks with the French president, François Hollande.

The meeting comes ahead of the latest report on Greece’s financial situation by the so-called troika of international lenders: the I.M.F., the European Central Bank and the European Commission. Germany has made the troika report a precondition for making any decisions on further assistance to Athens.

Nevertheless, discussion over how Germany might best help Greece to cover its growing financing gap has gathered speed in recent days. While the idea that Greece might need more time to pay back its debts remains open for debate among German lawmakers, both the chancellor and her finance minister have rejected the idea of a taking a loss on official loans to Greece.

Ms. Merkel’s spokesman, Steffen Seibert, told reporters on Monday that a write-off of Greece’s public sector debts was “out of the question.” He cited German law as stipulating that loans can only be granted to countries that are not considered in threat of default, meaning that such a write-down “would certainly not be in Greece’s interests.”

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