Gross domestic product in the 15 euro nations shrank 0.2 percent from the previous three months, when it also contracted 0.2 percent, the European Union's Luxembourg-based statistics office said today. The two quarters of contraction -- the result of this year's surges in the cost of credit, the euro and oil prices -- mark the first recession since the single currency was introduced almost a decade ago.
Consumers and companies are feeling the pain as sales, profits and hiring deteriorate, forcing the European Central Bank to embark on the fastest round of rate cuts in its history and governments to line up fiscal-stimulus programs. With the U.S. and Asian economies also struggling, leaders from the world's largest nations meet in Washington today to discuss ways to limit the impact of the slump.
The German economy, Europe's largest, contracted by a bigger-than-expected 0.5 percent in the third quarter, confirming it has entered its worst recession in at least 12 years, its government said yesterday. Ireland and Italy have also slipped into recession this year, while Spain's economy contracted in the third quarter for the first time in 15 years. Growth in the Netherlands and Portugal stagnated.
Bucking the trend, French GDP unexpectedly expanded 0.1 percent from the second quarter, when it shrank 0.3 percent. Economists had forecast a contraction of 0.1 percent.
The economy of the 15 nations using the euro is suffering from multiple shocks, including the euro's rise to a record $1.60 in mid-summer, the strongest inflation in almost 16 years and oil's jump to an unprecedented $147 a barrel in July. The cost of credit then surged globally after the September collapse of Lehman Brothers Holdings Inc., forcing banks to cut lending to businesses and households and shattering demand for euro-area exports from America to Hungary.