The Eurozone went into recession for the second time in four years. This was due to the sharp drop in activity in the south Europe economies that have been plagued by debt problems. The first reading of gross domestic product for the three months ended in September showed a contraction of 0.1 percent in the Eurozone. The region saw a decline of 0.2 percent in the second quarter. The last time the Eurozone was in recession was 2009.
Governments and households tried their best to decrease debt but the increase in unemployment as well as the uncertainties regarding the fate of weaker members of the euro region weighted on output across the Eurozone.
Euro’s largest economies Germany and France managed to get slight growth but Germany’s expansion slowed to 0.2 percent in the third quarter from 0.2 percent in the previous quarter. This was caused by the decrease in export and industrial output.
France posted a growth of 0.2 percent when analysts expected it to have a flat performance for the quarter. Italy was still stuck in recession. Economists warned that the near-term outlook for the region was poor.
The pressure on prices in the Eurozone has eased according to the data released by Eurostat. The annual inflation in October was 2.5 percent which was down from 2.6 percent in September. The European Central Bank held interest rates at 0.75 percent due to balanced risks to inflation. But it warned that a risk growth would be downgraded and ready to use its full range of monetary policies.
The European Commission has cut its estimate for 2013 growth to 0.1 percent. The ECB is scheduled to release its own modified forecasts next month. Some economists said that the current policy settings in Europe are incompatible with a significant economic growth over a period of time.