Eurozone economy shrinks. Germany ekes out growth.
Eurozone conracts by 0.2 percent for the second quarter. Germany manages a slightly better-than-expected 0.3 percent, while debt-laden euro nations shrink.
(Page 2 of 2)
Figures released on Monday showed deficit-cutting measures helped to shrink Greece's economy 6.2 percent year-on-year in the second quarter. Economists say the slump will persist as the government scrambles to secure billions in additional cuts to keep bailout funds flowing.Skip to next paragraph
Subscribe Today to the Monitor
Italy's second quarter data last week showed the economy contracted 0.7 percent quarter-on-quarter, compounding the difficulties for Mario Monti's technocrat government as it tries to avoid a bailout.
Spain's economy shrank 0.4 percent over the same period, pushing it deeper into recession, according to figures out two weeks ago.
The big unanswered question is whether a weakening economy will make Germans, the EU's paymasters, less likely to support government rescue efforts for the broader euro zone.
German Chancellor Angela Merkel has said repeatedly over the past year that she will do everything to save the euro, most recently after the European Central Bank signalled it would intervene in the bond market to lower Spanish and Italian borrowing costs.
Not all Germans support that course and the chancellor's room for manoeuvre appears to be shrinking at a time when both Greece and Spain may soon require new rescues. However, if ordinary Germans start to feel real economic pain, their response could be to demand their leaders sort out the crisis that is now finally knocking at their door.
Spanish and Italian bond yields have steadied since ECB President Mario Draghi promised to do whatever it takes to save the euro zone. It is quite possible that Madrid and Rome will seek help from the euro zone's rescue funds and the ECB before the year is out.
"It remains decisive whether the euro crisis can be controlled. We expect that the ECB has initiated a turning point with its signal of bond purchases," said Christian Schulz, economist at Berenberg Bank. "After a weaker summer the German economy will be able to grow faster again from the fourth quarter."