Euro zone economy shrinks in Q1, marks longest ever recession

BRUSSELS (Reuters): The Euro zone’s economy contracted for the sixth straight quarter at the start of this year, data showed on Wednesday, marking its longest recession on records dating back to 1995. Falling output across the bloc, from France to Finland, meant the 17-nation economy shrunk 0.2% in the January to March period, the EU’s statistics office Euro stat said.

That was slightly worse than the 0.1% contraction forecast by economists polled by Reuters and highlighted the devastating impact of the Euro zone’s debt and banking crisis that has driven unemployment to a record 19 million people. While Germany managed to grow 0.1% in the first quarter, the bloc’s recession is now longer than the five quarters of contraction that followed the global financial crisis in 2008/2009 and dampens optimism of a quick recovery. The European Central Bank’s promise to buy the bonds of struggling governments has removed the threat of a Euro zone break-up, but the crisis that began in Greece in 2009 has seeped across the bloc to suck in the wealthy nations such as France.

EU leaders are already trying to shift away from the budget cuts that have dominated the response to the debt crisis since 2009, while the ECB cut the cost of borrowing to a new record low of 0.5% this month. But the move is likely not to be enough to break a damaging cycle in which governments are cutting back spending, companies are laying off staff, Europeans are buying less and young people have little hope of finding employment.