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Bleak times ahead for euro zone

Tuesday, November 15, 2011 - 02:13

Nov. 15 - The French and German economies grew well in the third quarter but the euro zone overall grew by only 0.2% and analysts fear there's worse to come. Joanna Partridge reports

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The debt crisis is raging in Europe, but the euro zone's two largest economies still managed to grow in the third quarter. The German economy, the powerhouse of Europe, grew by 0.5 percent, much as expected. France grew by 0.4 percent, rebounding from a second quarter contraction. The euro zone economy overall grew by 0.2 percent and tougher times are forecast as Italy, Greece, Portugal and Spain are forced to adopt tough austerity measures in order to stop the bond markets driving them towards default. Torge Middendorf is Senior Economist at West LB. SOUNDBITE: Torge Middendorf, senior Economist at West LB, saying (English): "We are expecting a rather soft recession in the euro zone but maybe even in Germany. But we have to wait and see how this debt crisis evolves. At the moment we see no solution other than the ECB buying bonds so I think the market turmoil will continue in the weeks ahead." France has rushed through measures to make 65 billion euros of tax increases and budget cuts over five years. President Nicolas Sarkozy is trying to balance protecting the country's top credit rating while not angering voters ahead of next year's election. Jane Foley from Rabobank says the markets have other worries about France. SOUNDBITE: Jane Foley, Senior Currency Strategist, Rabobank, saying (English): "It's concerned about its banking sector. France is of course quite exposed to the peripheral debt situation and if this situation does deteriorate then the French banks could be quite vulnerable and of course that would put additional pressure on the sovereign to step in and that would almost certainly lose France's AAA credit rating." The outlook is gloomy, even in countries which aren't directly hit by the debt crisis. The European Central Bank's new President Mario Draghi also predicts the bloc will suffer a "mild recession" by the end of the year. And analysts say countries don't seem to have visible growth strategies in place to counter the effects of austerity. Joanna Partridge, Reuters

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Bleak times ahead for euro zone

Tuesday, November 15, 2011 - 02:13