Euro-zone contracts

Europe's economy remains mired in recession, with second quarter figures published on Thursday showing gross domestic product (GDP) contracting by 0.1 percent in the euro zone and by 0.3 percent in the European Union as a whole on the quarter.

The estimates by the European statistical office, Eurostat, dashed hopes of an earlier-than-expected recovery on the continent after two of the EU's biggest economies - Germany and France - both grew by 0.3 percent.

Their performances were offset by those of Italy and Britain, where GDP fell on the previous quarter by 0.5 and 0.8 percent respectively.

However, Eurostat's figures were better than the predicted 0.5 percent contraction between April and June.

Compared with the same quarter of 2008, GDP fell by 4.8 percent in the 27-member EU and by 4.6 percent in the 16-member euro zone.

Examining the quarter-on-quarter figures, Europe's best performer was Slovakia (2.2 percent), followed by Germany, France, Greece and Portugal (0.3 percent each).

The worst performers were the Baltic trio of Lithuania (-12.3 percent), Estonia (-3.7) and Latvia (-1.6), along with Hungary (-2.1), Romania (-1.2) and the Netherlands (-0.9).

European GDP has been falling steadily since the first half of 2008, plunging the economy into its worst downturn in decades.

Surprise pickup in Germany and France

Figures out earlier on Thursday indicating that Germany and France technically climbed out of recession in the three months to the end of June had raised hopes of recovery across the rest of Europe.

The national statistics offices said the economies in both France and Germany expanded by 0.3 percent, technically bringing to an end the worst recession that has hit the two countries since the Second World War.

Germany's Federal Statistics Office said the preliminary quarter-on-quarter rise was led by a rise in private and public consumption, construction activity and net trade.

However, year-on-year, the German economy shrank by 7.1 percent in the second quarter, the data showed.

Europe's largest economy had been in deep recession, with GDP declining for four consecutive quarters.

Some economists had forecast a 0.3 percent contraction in GDP for the second quarter.

However, the German economics ministry had said prior to the publication of the latest GDP figures that the economy probably stabilized in the second quarter.

The Paris-based statistics office said a pickup in exports, which rose by 1.0 percent during the quarter, helped power the French growth rate.

Fragile state of economy

As a reminder of the fragile state of the eurozone economy however, the European Union's statistics office said seasonally adjusted industrial production fell by month on month 0.6 percent in June. The zone's industrial output fell by 17 percent on the year in June.

Moreover, economists have also expressed concern that unemployment in the eurozone will rise in the coming months as the economic fallout from the global recession slowly catches up with the currency bloc's labor market.

rb/dpa/AFP/Reuters/AP

Editor: Chuck Penfold