Greman economy enters worst recession
US financial crisis now started showing its effect in EU, the first big victim is non other than strongest economy Germany.
The German economy, Europe's largest, contracted more than economists expected in the third quarter, pushing the nation into the worst recession in at least 12 years.
Gross domestic product dropped a seasonally adjusted 0.5 percent from the second quarter, when it fell 0.4 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected a 0.2 percent decline, the median of 40 forecasts in a Bloomberg News survey showed. The economy last contracted this much over two consecutive quarters -- the technical definition of a recession -- in 1996.
German companies are scaling back production as slower global growth erodes export demand. Siemens AG, Europe's largest engineering company, reported a profit decline today and plans to cut 16,750 jobs by 2010. Germany's benchmark DAX Index has tumbled more than 40 percent this year, business confidence fell to a five-year low last month and manufacturing orders plunged in September.
``The German recession has begun in earnest and it's very serious,'' said Holger Schmieding, chief European economist at Bank of America Corp. in London. ``It raises the risk of a German contraction of more than 1 percent next year and we will have to revise down our forecast for the euro area as well.''
Eurostat, the European Union's statistics arm, will publish third-quarter growth data for the euro region tomorrow.