German growth slows as recession hits Italy and Netherlands

Thursday 16th February 2012

The German economy contracted in the last quarter and faces slower growth as the eurozone debt crisis deepened, according to the latest data.

German gross domestic product contracted 0.2% in the fourth quarter of 2011, a slowdown from upwardly revised 0.6% growth in the July-September period (Q3). This is Germany’s first negative quarter since the second quarter of 2009.

The Organization for Economic Co-operation and Development (OECD) has warned that the German economy faces markedly slower growth and “considerable downside risks” if the country fails to stem the eurozone debt crisis.

Economists and the rest of the EU’s member states fear such an outcome, which could force Germany’s already weak banking sector to stop lending.

Italy and the Netherlands both saw their economies shrink by 0.7% in the fourth quarter, the second consecutive quarter of economic contraction which means both countries are technically in recession.

Europe's debt crisis has already pushed Greece, Portugal and Belgium into recession.

However, France enjoyed a surprise growth of 0.2% at the end of last year, attributed to healthy increase in exports.

Corporate investment picked up and domestic consumption remained solid, bringing growth for the year to 1.7% in line with the French government's forecast.

France's economy also beat expectations that it would shrink by 0.1%.

Overall the 17 nations that make up the eurozone saw economic activity shrink 0.3% in the fourth quarter. By comparison the United States reported growth of 0.7%.

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