http://www.bloomberg.com/news/2012-02-15/euro-economy-shrinks-less-than-forecast-with-first-contraction-since-2009.html
Europe’s economy contracted in the fourth quarter for the first time in 2 1/2 years as the region’s debt crisis undermined confidence and forced governments from Spain to Greece to toughen budget cuts.
Gross domestic product in the 17-nation euro area fell 0.3 percent from the prior three months, the first drop since the second quarter of 2009, the European Union’s statistics office in Luxembourg said today. Economists forecast a drop of 0.4 percent, the median of 42 estimates in a Bloomberg News survey shows. In the year, the economy grew 0.7 percent.
Europe is facing its second recession in less than three years and Moody’s Investors Service cut the ratings of six of the region’s countries on Feb. 13, saying policy makers haven’t done enough to restore investor confidence. Euro-area finance ministers today will hold a teleconference to prod Greece to do more to clinch an aid package needed for a March bond payment.
“We’ll probably see another contraction in the first quarter, which means a technical recession,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “The situation should stabilize afterward followed by a slight economic recovery. The fiscal crisis is the main risk.”
The euro was little changed against the dollar after the data, trading at $1.3171 at 10:01 a.m. inLondon, up 0.3 percent on the day.
The statistics office is scheduled to publish the breakdown of euro-area fourth-quarter GDP next month.
German Contraction
In a separate report today, the office said that euro- region exports rose 0.1 percent in December from the previous month, when adjusted for seasonal swings. Imports fell 0.9 percent from November and the trade surplus widened to 7.5 billion euros ($9.9 billion) from 6.1 billion euros.
In Germany, Europe’s largest economy, GDP (GRGDPPGQ) fell 0.2 percent from the third quarter. Economists in a Bloomberg survey had forecast a drop of 0.3 percent. France’s economy unexpectedly expanded in the fourth quarter, with GDP rising 0.2 percent.
“The German economy only took a growth pause and is not approaching a new recession,” saidCarsten Brzeski, a senior economist at ING Group in Brussels. “Of course, a quick rebound is not an automatism and the big unknown for the German economy remains the sovereign-debt crisis.”
Greek Writedowns
Greece’s GDP slumped 7 percent in the fourth quarter from a year earlier, according to a report yesterday. The economies of Spain, Belgium, Italy and Portugal also contracted in the final three months of 2011. In Hungary, the economy expanded 0.3 percent from the third quarter, while Bulgarian GDP advanced 0.4 percent and the Czech Republic reported a drop of 0.3 percent, reports showed today.
BNP Paribas SA (BNP), France’s largest bank, said today that fourth-quarter profit dropped 51 percent, hurt by writedowns on Greek sovereign debt. MAN SE (MAN), the German truckmaker controlled by car manufacturer Volkswagen AG (VOW), said yesterday that sales and operating profit will decline in 2012 as the debt crisis discourages companies from investing.
Still, recent surveys indicate the pace of contraction won’t accelerate in the current quarter. Euro-region services output expanded in January after shrinking in the previous four months and economic confidence increased. German investor confidence jumped to a 10-month high in February.
European Central Bank President Mario Draghi has also pointed to signs of stabilization in the euro-area economy and said the ECB averted a credit crunch with its three-year loans to lenders in December. The central bank will offer a second round of financing, known as LTRO, at the end of this month.
Second Bailout
European officials are continuing to press Greece to deliver the budget cuts required in exchange for a second bailout. Luxembourg Prime Minister Jean-Claude Juncker, head of the euro finance panel, said finance ministers will discuss “outstanding issues” during the conference call today and hold their next meeting as scheduled on Feb. 20.
“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the program,” Juncker said yesterday. He also pressed for “further technical work” on Greek budget cuts.
More than two years after the debt crisis emerged in Greece, European leaders face international pressure to do more to tackle the source of contagion that threatens to drag down the global economy. Group of 20 nations have signaled they won’t reach a consensus on crisis aid for Europe via the International Monetary Fund at a Feb. 24-26 meeting of finance chiefs until Europe increases the size of its firewall.
Bond Payment
Erik Nielsen, chief global economist at UniCredit SpA (UCG) in London, said in an e-mailed note that Greece will be able to make a 14.5 billion-euro bond payment on March 20.
“I still think that the present deal will be done and that we’ll get through March 20, but I’m really wondering now whether so much damage has been done that this marriage no longer can be rescued,” he said. “Nobody can doubt that the Greek society is on the edge.”
Some companies are relying on faster-growing markets to bolster sales. Hermes International SCA (RMS), the French maker of Birkin bags, reported full-year sales on Feb. 9 that beat its own forecast, led by a 29 percent surge in Asia. The same day, Daimler AG (DAI) forecast higher 2012 profit than analysts had predicted, propelled by record demand for Mercedes-Benz cars.
“The U.S. certainly is the bright spot as far as the development in the recent months is concerned,” Daimler Chief Executive Officer Dieter Zetsche said. “We see a buildup in momentum there. We’re bullish about the further development in China.”
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