The nationwide general strike in central Madrid on Wednesday. Spain continues to drag on the eurozone’s economic growth. Photograph: Juan Medina/Reuters
The eurozone has tumbled into a double-dip recession as the crisis in Portugal, Spain and Greece spreads to other countries in the currency bloc.
Eurozone GDP fell by 0.1% in the third quarter, after shrinking by 0.2% in the second quarter, plunging the region into a recession that economists fear could drag into next year.
The big surprise was the triple-A rated Netherlands, which saw its economy shrink by 1.1% in the third quarter, dragged lower by a 3.1% decline in investment and a 2.4% drop in exports. Economists had expected Dutch GDP to contract by just 0.2%. Austrian GDP also shrank by 0.1%.
But core countries such as France and Germany continued to show growth, for the time being. French GDP ticked up by 0.2% in the third quarter, compared with analyst expectations that the economy would remain at a standstill. That will be a rare piece of good news for the president, François Hollande, who has suffered a dramatic decline in popularity during his first six months in power.
Germany also beat expectations with growth of 0.2% in the third quarter but Europe‘s biggest economy is clearly feeling the effects of the eurozone crisis. Growth has slowed from 0.5% in the first three months of the year, and 0.3% in the second quarter.
Portugal and Greece remain in very deep recessions, with output falling by 0.8% and 7.3% respectively – while the economies in Italy, Spain and Cyprus continued to contract.
Jennifer McKeown of Capital Economics said: “The business surveys point to far worse to come throughout the region in the fourth quarter. With austerity starting to hit French households and German unemployment beginning to rise, the outlook for domestic spending is bleak even in the core.” She expects eurozone GDP to shrink by up to 0.7% this year, and another 2.5% in 2013.
Economists said the data could prompt the European Central Bank to cut rates from 0.75% to 0.5% sooner rather than later. Howard Archer of IHS Global Insight said: “Indeed, an interest rate cut in December is very possible.”