Fergal O’Brien and Simon Kennedy
Friday, Nov 14, 2008
Europe’s economy fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes amid the worst financial crisis since the Great Depression.
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 of limiting the impact of the slump.
“The situation is likely to get worse before it gets better,” said Nick Kounis, an economist at Fortis in Amsterdam. “There will be no real recovery before 2010.”
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From a year earlier, the euro-area economy expanded 0.7 percent in the third quarter. Both the quarterly and annual rates were in line with the median estimates of economists surveyed by Bloomberg News.
Separate figures today showed that inflation in October eased to 3.2 percent from 3.6 percent in September, matching an initial estimate on Oct. 31. Energy-price inflation cooled from 13.5 percent to 9.6 percent, the lowest since December.