Feb.14 - The euro zone economy contracted in Q4 at the fastest rate since the depths of the crisis in late 2008. Grim figures from Germany, France and Italy. But this is as bad as it gets, right? Jamie McGeever reports
It's an uphill struggle, but the euro zone economy is recovering. You just can't see it yet. The latest official figures show the world's second largest economic bloc SHRANK in the fourth quarter last year, by 0.6%. Peter Dixon, economist at Commerzbank, says things surely won't get any worse. SOUNDBITE: Commerzbank global financial economist, Peter Dixon, saying (English): "A negative figure for the fourth quarter in the euro zone. But as we go forward, I think the signs are, we'll see some signs of stabilisation in the first half of 2013. I mean that's not to say we'll get big, positive, growth numbers. But something maybe flat, or maybe marginally negative in Q1 and hopefully something flat or slightly positive in Q2." If the euro zone as a whole is struggling, it's because its engine - Germany - isn't firing on all cylinders. German GDP shrank by 0.6 percent in the fourth quarter of 2012 - more than feared, and the third biggest drop since the euro's inception 14 years ago. France, the euro zone's second biggest economy, also shrank at the end of last year, by 0.3 percent. SOUNDBITE: Commerzbank global financial economist, Peter Dixon, saying (English): "Basically the French problem is one of a lack of competitiveness. The economy hasn't really undergone many of the reforms we've seen elsewhere in the euro zone, particularly Germany, over the course of the last ten years. And what that means therefore, is that if and when the recovery does finally arrive, the French economy will continue to struggle." With France and Germany sputtering in Q4, it's no surprise the region's third largest economy, Italy, went into reverse too. And how! GDP shrank by a huge 0.9 percent, deepening the recession. And talking of recession, official figures for Spain are released later this month. But we already know it is mired in a deep and painful recession. 2013 will be an extremely bumpy ride, once again, for Spain. The euro zone locomotive, however, should start to accelerate as the year progresses. But that will largely depend on the strength of the German engine. Optimists will point out that Germany is much better equipped than its peers to cope with a strong euro. So if not full steam ahead, then certainly onwards and upwards.