Spain’s economy, meanwhile, remained in recession, contracting 0.3 percent in the third quarter after a 0.4 percent contraction in the second quarter, according to revised figures released Thursday.
Economists expect the E.U. 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, or $12 trillion, euro zone 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 quarterly performance of Germany, Europe’s dominant economy, was in line with forecasts, but 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,” said Jörg Kraemer, chief economist at Commerzbank. He predicted that the German economy probably would shrink somewhat in the fourth quarter, given that orders have been falling for the last year and the business climate “has caved in” on “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,” Mr. Kramer said.
Hopes for a broader recovery next year are also fading, with the European Commission saying the euro zone 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.
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 European Commission say are crucial to healing the wounds of a decade-long, credit-fueled 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.
Spain sank deeper into recession in the third quarter, as a brutal austerity program hammered public spending and weak domestic demand piles pressure on the country to seek international aid.
Spain’s flagging economy, the fourth largest in the euro zone, is sharply in the market’s focus on concerns the government cannot control its finances but remains reluctant to apply for European aid.
Spain urgently needs to seek a bailout, a member of the European Central Bank governing council, Luc Coene, was quoted as saying in a Belgian newspaper on Thursday.
The government forecast for end-2012 is a 1.5 percent contraction, though Economy Minister Luis de Guindos has said figures suggested the economy would perform better.
“It’s true that Spain surprised on the upside because of strong exports which had a positive spillover on to investments,” said Tullia Bucco, an economist at Unicredit, adding that while the prospect might “provide some comfort” for Prime Minister Mariano Rajoy, “it doesn’t change the challenges that Spain faces ahead.”
Article source: http://www.nytimes.com/2012/11/16/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss
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