Europe Debt Crisis: Eurozone Shrinks By 0.3 Per Cent In Q4, First Decline Since Q2 2009

BRUSSELS - The 17-nation eurozone economy contracted by 0.3 per cent in the final three months of 2011 as many countries slipped back into recession, official figures showed Wednesday, in a clear sign that the impact of Europe's debt crisis has hit every country in the single currency bloc.

The decline — the first since the second quarter of 2009 — came as the debt crisis intensified and threatened to spread to big economies, notably Italy.

The eurozone, however, is not yet in recession as that's only official after two quarters of negative growth — in the third quarter, the eurozone eked out growth of 0.1 per cent.

Many eurozone countries are in recession, however, including Italy, the Netherlands and Portugal.

Wednesday's figures from Eurostat, the EU's statistics office, were a little better than most predictions of a 0.4 per cent drop.

However, figures earlier showing an unexpected 0.2 per cent gain in France and a smaller-than-anticipated 0.2 per cent drop in Germany had stoked some expectations that the figure would be even better than forecast.

For 2011 as a whole, the eurozone economy grew by 1.5 per cent.