Euro zone economy shrinks in Q1, marks longest ever recession

Wed May 15, 2013 5:00am EDT

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* Euro zone economy contracts 0.2 percent in first quarter
    * France, Italy, Spain, Netherlands, Finland all shrink

    BRUSSELS, May 15 (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 percent in the January to
March period, the EU's statistics office Eurostat said.
    That was slightly worse than the 0.1 percent 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 percent 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 percent 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.
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