- Economic region’s two biggest economies running into trouble
- Research shows business activity in eurozone is declining
By Sam Webb
PUBLISHED: 12:24 EST, 24 October 2012 | UPDATED: 17:35 EST, 24 October 2012
Germany and France are being sucked into the abyss as the crisis in the eurozone deepens, economists warned last night.
The slump that began in Greece and spread to other peripheral countries in the single currency bloc has spread to the core – with the region’s two biggest economies now heading for recession.
Research group Markit said its closely watched index of activity for private firms in the eurozone – where anything below 50 represents decline – fell from 46.1 in September to 45.8 this month.
It is the worst reading since June 2009 and indicates that the recession across the region is deepening.
But even more worrying is the slump in Germany – Europe’s biggest economy – where the barometer of activity has fallen from 49.2 to 48.1.
‘The eurozone has slid further into decline at the start of the fourth quarter,’ said Chris Williamson, chief economist at Markit.
He added: ‘Even Germany is not immune. It’s very disappointing. It’s a depressing scenario as things are getting worse.’
The rate of decline is even more brutal in France – the index hit 44.8 – as Europe’s second biggest economy plunges deeper into the mire under Socialist president Francois Hollande. Analysts warned that the outlook for France was bleak.
Kathleen Brooks, of currency experts Forex.com, said: ‘President Hollande has a problem on his hands in the form of weak growth and rising unemployment.
Problems: The figures will make concerning reading for German Chancellor Angela Merkel (left) and French president Francois Hollande (right)
‘We will be watching closely to see if the second largest economy in the currency bloc continues to exhibit traits more associated with the periphery.’
A report by Capital Economics said the eurozone was already back in recession and would not recover until 2014.
It said the German economy would slide back into recession in the final three months of this year before finally starting to grow again in 2014.
The report warned there would be no recovery in France, Italy or Spain until 2015 at the earliest.
Economist Annalisa Piazza of Newedge Strategy said: ‘The picture for the eurozone economy remains extremely bleak.’