THE FRENCH economy shrank in the third quarter of the year, according to updated estimates released yesterday, while the pace of Italy’s economic decline appears to be worse than previously believed.
France, the second largest economy in the Eurozone, will lose 0.1 per cent of GDP in the three months to September, its central bank expects.
Separate data from France’s National Institute for Statistics and Economic Studies (INSEE) showed French industrial production rose by 0.2 per cent in July, yet the positive upturn is not believed to be enough to revive the flagging economy.
French output has been flat since October last year, and any decline in GDP will place greater pressure on new President Francois Hollande.
And the situation is even worse elsewhere in the euro area, with Italian GDP collapsing by 0.8 per cent in the second quarter, according to new estimates released yesterday.
Its economy lost 2.6 per cent annualised in the three months to June, the official figures showed – 0.1 per cent worse than previously believed.
“After the fourth quarterly decline in a row, the Italian economy looks set to remain in contraction territory for another few quarters,” said ING’s Paolo Pizzoli, predicting a further 0.3 per cent decline in the third quarter.
Meanwhile, the European Central Bank (ECB) confirmed yesterday that it did not buy any government bonds last week, as it also announced the end of its Securities Markets Programme (SMP).
The ECB agreed last week to replace the SMP with a new, potentially more aggressive debt-buying programme. Some Eurozone leaders, such as Italian Prime Minister Mario Monti, have called for the ECB to intervene more proactively in pulling down the borrowing costs of embattled states.
The SMP, which was used to snap up bonds during Eurozone strife last year but has not been utilised at all since March, has a balance of €209bn.