Data confirms Eurozone back in a recession

 
Julian Harris
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THE EUROZONE tumbled back into an official recession in the third quarter of the year, data from Brussels confirmed yesterday, with bad economic news weighing on markets.

The 17-country single currency area saw GDP dip by 0.1 per cent in the three months to September, its Eurostat office said – the second straight quarter of contraction, following a 0.2 per cent fall in the three months to June.

Compared to the third quarter of 2011, GDP was down 0.6 per cent in the Eurozone, which continues to be burdened by its debt crisis.

While the core economies of France and Germany both managed 0.2 per cent growth in third quarter, the Netherlands surprised economists by shrinking 1.1 per cent. Spain and Italy were down by 0.3 per cent and 0.2 per cent respectively, the data showed.

Separate figures from Eurostat showed that inflation in the Eurozone came in at 2.5 per cent last month, little changed from 2.6 per cent in September.

“We believe that the European Central Bank (ECB) will take interest rates down from 0.75 per cent to 0.5 per cent sooner rather than later,” commented Howard Archer of IHS Global Insight. “Indeed, an interest rate cut in December is very possible.”

The FTSEurofirst 300 index closed down 0.9 per cent.

•European Union officials are examining legal options to side-step a possible British veto on the bloc’s long-term budget, in a bid to weaken David Cameron’s trump card in the talks, diplomats said.

The UK is one of several net contributors demanding deep reductions to EU spending plans. Officials say Cameron is the most likely to make good on a threat to veto a deal at a summit of EU leaders starting next Thursday.

“The British are the only ones who consider it potentially acceptable to pull everything down around them at the summit,” said one EU diplomat.