German & French Economies Contract

Hopes of economic recovery in the eurozone have been thrown into doubt after figures confirmed its two largest economies had performed worse than forecast.

Gross Domestic Product (GDP) in Germany fell by 0.6% on the previous quarter in the final three months of 2012 - its biggest contraction since 2009 and further evidence that the wider slowdown in Europe is hurting the health of the single currency bloc's biggest economy.

Exports - the motor behind its economic engine - did most of the damage as demand fell across Europe in particular where the debt crisis has left many nations in recession.

France's 0.3% fall in GDP was also a touch worse than expected.

Back revisions to the French figures also showed its output fell by 0.1% in each of the first and second quarters of 2012, meaning the country has already experienced one bout of recession in the last twelve months.

The revelation prompted French Prime Minister Jean-Marc Ayrault to acknowledge for the first time on Wednesday that weak growth was putting his government's deficit goal for 2013 out of reach.

GDP figures for the eurozone as a whole released today were also worse than expected.

They were forecast to show a quarter-on-quarter drop of 0.4% but Eurostat measured a 0.6% fall.

The measure from the EU's statistics office means that the bloc has now contracted for three straight quarters - a recession is officially defined as two quarters of negative growth.

While Britain is tipped to avoid a new recession but continue to flat-line the eurozone is not alone in its struggles.

Japan in recession while the US economy was flat in the final quarter of 2012, according to Eurostat.

Economists say the euro area's GDP may also shrink in the first quarter of 2013 although resilient Germany is expected to bounce back.

Just two weeks ago Spain, which has been battling to avoid a sovereign bailout amid a rescue for its banks, confirmed it remained deep in recession after a 0.7% GDP contraction in the fourth quarter.

Madrid is pressing on with harsh austerity measures to cut its debt but may be given more time to meet its deficit targets by the European Commission if its economy worsens further.

The European Central Bank (ECB) predicts the eurozone will pick up more markedly later in the year although its currency, if it keeps strengthening, could quickly snuff out hard-won competitive advantages for its high debt members including Ireland (OTC BB: IRLD - news) , Greece and Portugal.

Greece has been mired in recession for six years.

Its unemployment rate hit a record 27% in November (Xetra: A0Z24E - news) , with 61.7% of adults under the age of 24 without a job.