European economy contracts

Gross domestic product fell by 0.2pc in the eurozone. The fall compared with GDP growth of 0.7pc in the first quarter, and provides further evidence that the worst of the slowdown in the global economy may not yet be behind us.

Europe's economy contracted in the
second quarter – the first time it has shrunk since the launch of the
euro almost a decade ago.
But the second quarter marked a low for
the eurozone, following growth in the previous quarter.
The German economy contracted for the
first time in almost four years, while the French economy shrank by
for the first time in nearly six years.
Germany's fall was the sharpest, with
gross domestic product down 0.5pc when seasonally adjusted, compared
with a 1.3pc rise in the first quarter.
The French economy contracted by 0.3pc,
contrary to the National Institute for Statistics and Economic
Studies' (INSEE) expectation that it would grow by 0.2pc. Italy also
fell by 0.3pc in the second quarter.
INSEE also revised down its previous
estimate for French economic growth in the first quarter to 0.4pc
from 0.5pc.
In Germany it was the first contraction
of the economy – Europe's largest – since the third quarter of 2004
when GDP fell by 0.2pc, according to the country's Federal
Statistical Office.
The struggle in the period was mainly
the result of falls in construction activity, consumer spending, and
capital investment.
The recent strength of the euro and a
lack of business confidence also hit demand for German exports, which
have helped power the country's growth in recent years.
After publication of the figures the
euro was flat against the dollar at $1.4930 and little changed
against sterling at 79.78p.
The German Government forecasts growth
will slow to 1.7pc this year from 2.5pc in 2007, slowing further to
1.2pc in 2009.