Eurozone has One Foot in Recession: Economy Shrank in Q4

As reported by Pan Pylas from Associated Press, The 17-nation eurozone has one foot in recession, according to official figures showing the economy contracted 0.3% in the final three months of 2011.

The report is a clear sign that Europe’s debt crisis has spared no country in the single-currency bloc.

The decline was the first since the second quarter 2009 and followed a meager 0.1% increase in the previous three-month period, Eurostat, the EU’s statistics agency, said Wednesday.

The figure was slightly better than expected but shows Europe’s economy was hit hard when the debt crisis intensified and threatened to spread to big economies, notably Italy. In November, it appeared likely that the eurozone’s third-largest economy would need financial rescue like Greece, Ireland and Portugal.

In a desperate bid to save the euro, Europe’s governments agreed to tie their economies more closely together and the European Central Bank offered super-cheap long-term loans to struggling banks. The twin response has helped calm market jitters this year, despite the ongoing confusion over Greece’s second bailout.

Whether that was enough to avoid a recession — two consecutive quarters of economic contraction, according to a common rule of thumb — remains to be seen.

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