Eurozone Enters Recession Again

Eurozone Enters Recession Again

The Eurozone has officially entered recession after its collective economic output fell for the second quarter running.

Eurostat, the EU's statistics office, found the collective GDP of the single currency area contracted by 0.1% in the July to September period, following a 0.2% decline recorded in the second quarter.

The grim news plunges the 17-nation bloc into its second recession since 2009.

The wider EU avoided the same fate as it saw output rise 0.1% during the quarter, largely on the back of the Olympics-related boost in Britain.

The Office for National Statistics had previously measured the UK's third quarter GDP growth at 1%.

The eurozone's economy - worth £7.6trn - was always under pressure given that Italy and Spain had already been contracting for a year, while Greece been in recession for five years.

Germany and France, the bloc's biggest economies, could not save the group from the double-dip, even though both countries managed 0.2% growth in the third quarter.

The development is likely to intensify debate within the euro area about the effect of deep austerity on economic growth.

Millions of people across countries including Spain, Portugal, Greece and France protested against government spending cuts on Wednesday - cuts that EU policymakers say are vital to end the debt crisis.

Paul De Grauwe, an economist with the London School of Economics, said: "We are now getting into a double dip recession which is entirely self-made.

"It is a result of excessive austerity in southern countries and unwillingness in the north to do anything else," he suggested.

However, Professor Philip Booth, Editorial Director of the Institute of Economic Affairs, said: "Today's news that the eurozone is in recession will be met by a chorus of voices suggesting that the most highly indebted governments must spend and borrow more.

"This is entirely the wrong response."

The European Commission is predicting a 0.4% contraction for the eurozone as a whole for 2012 with the bloc's economy growing by just 0.1% in 2013.

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