Euro-zone – the currency area – has slid into a recession if the latest economic growth numbers are any indication. The European Union statistics agency Eurostat said on Friday the euro-zone’s gross domestic product in the three months to Sept. 30 was 0.2% lower than in the second quarter, and 0.7% higher than a year earlier. This is the first time since the currency area was formed in 1999 there is a dip in output in two consecutive quarters.
The economies of Ireland, Germany and Italy are in recession since their economies have been contracting for two more than two consecutive quarters. However, the euro-zone’s second largest member France avoided a recession since it economy grew 0.1% in the third quarter. But its second quarter had contracted 0.3%.
Acording to media reports, the contraction in economic growth will lead European Central Bank to take bolder action than it has to date. In fact when other central banks like the Bank of England has cut its key interest rate 3.75 percentage points this year and the U.S. Federal Reserve by 3.25 points, the ECB has cut by just three quarters of a percentage point. Its governing council next is meeting on Dec. 4.
However, the euro zone has preceded the U.S. in entering a recession. The U.S. economy shrank 0.1% in the third quarter, but expanded 0.7% in the second.
Besides this, the Organization for Economic Cooperation and Development also forecast Thursday that the euro-zone economy will contract 0.5% in 2009. That is in line with the International Monetary Fund’s most recent forecast, reports Wall Street Journal.