Eurozone slump worst in 50 years

Eurozone gross domestic product fell 1.5 per cent in the fourth quarter, led by a dramatic deterioration in Germany. This highlighted how the fortunes of the world’s economies have become entwined as the global crisis has unfolded.
German gross domestic produce contracted by 2.1 per cent in the final three months of last year – the worst quarterly performance since the country was reunified in 1990. That was significantly faster than the UK, where the fourth quarter contraction was in line with the eurozone average. Germany has had no housing bubble but has depended on exports to power growth.

With little sign of any rebound in global or European prospects, resistance to further cuts in eurozone interest rates has crumbled at the European Central Bank, which is widely expected to cut its main policy rate another half percentage point next month to 1.5 per cent – the lowest ever.

The ECB could soon follow the US Federal Reserve and the Bank of England in taking additional “non-conventional” measures to boost the economy – for instance by buying corporate debt.