Eurozone Economy Hits Nadir in First Quarter

The first quarter of 2009 saw the worst of the economy in the Eurozone with both regions' gross domestic product (GDP) contracted by 2.5 percent quarter-on-quarter.

The first quarter of 2009 saw the worst of the economy in the Eurozone and in European Union (EU) as official figures showed both regions' gross domestic product (GDP) contracted by 2.5 percent quarter-on-quarter.

The flash estimates from the EU's statistics agency Eurostat marked the bleakest economic performance of the 16-nation euro zone since it came into being in 1999. And it was the same for the 27-nation EU.

In the last quarter of 2008, growth rates contracted by 1.6 percent in the Eurozone and fell by 1.5 percent in the EU.

On year-on-year basis, GDP in the euro zone in the first quarter fell by 4.6 percent, and in the EU, it shrank by 4.4 percent after being seasonally adjusted.

Major economies of the Eurozone, Germany, France, Italy and Spain all saw a worse performance at the same time.

Germany saw a shrink of 3.8 percent quarter-on-quarter in GDP in the first three months of this year, the worst in nearly half a century. It was deeper than a three-percent fall predicted by economists.

The German economy, the biggest in the Eurozone, contracted for the fourth straight quarter, with the first quarter marking the biggest quarterly fall since records began in 1970.

After falling 1.1 percent in the last quarter of 2008, France, the second largest EU economy, recorded a fall of 1.2 percent quarter-on-quarter.

At the same time, Italy, the Netherlands and Britain witnessed an economic contraction of 2.4 percent, 2.8 percent and 1.9 percent quarter-on-quarter, respectively.

But economists in Europe generally believed that things would turn better in the quarters to come as the economy hit the nadir in the first quarter of the year. But they also said there would be no quick recovery.

There were positive signs in the real economy in Europe, European Commissioner for Economic and Monetary Policy Joaquin Almunia said on Thursday.

"We are seeing some progress. Financial markets have stabilized and recent indicators give grounds for optimism," he told an European Economic Forum.

"In the real economy too, we have seen some positive signals in terms of business confidence and export data," Almunia noted. "The results of the massive stimulus underway here in Europe and around the world should begin to feed through in the coming months."

However, Almunia also warned that: "A return to growth is not yet there, "as our economies and financial systems have come under unprecedented pressure from the most severe financial crisis in the post war era."

European Commission spokesman Mark English told a press briefing that the Eurostat figures for the first three months of the year exceeded market expectations of around minus 2 percent for the euro zone, and weaker than the Commission's recent forecast of minus 2.1 percent.

"This is because certain downside risks referred to in most forecast have materialized," he said.

"But they are not surprising and "broadly in line with the forecast scenarios," he said, "They do not alter our view that stability will gradually take hold, followed by gradual recovery in 2010 as set out in our spring forecast."
 
By Xiong Tong (XFN)