Recession stalks shrinking eurozone economy

BRUSSELS, August 14, 2008 (AFP) – The eurozone economy contracted for the first time ever, with output falling 0.2 percent in the second quarter increasing the threat of recession driven by a sharp global downturn. The initial official figures come amid rising concern that recession, two consecutive quarters of contraction, is now stalking the 15-nation eurozone, a prospect now pushing down the euro.

“Today’s releases suggest that this probability has risen, probably to over 50 percent now,” said Sunil Kapadia, European Economist for UBS Investment Research.

Recent data from Britain and Japan also suggest leading economies are flirting with recession; and the International Energy Agency says energy and other data signal the US economy is most probably heading towards recession.

A European Commission spokeswoman shied away from using the “R” word, while acknowledging the eurozone figures looked bad, especially with eurozone inflation running at a record four percent.

“I think it’s a bit exaggerated to use that word,” she told reporters in Brussels, stressing that the preliminary figures could be revised later.

But she also said: “The signs are not really very good for the future”.