Europe’s recession deepens

Bloomberg

Gross domestic product in the eurozone fell 1.6 percent from the previous three months, the most in at least 13 years, the European Union’s statistics office in Luxembourg said yesterday, revising down a March 5 estimate of a 1.5 percent contraction. Investment plunged 4 percent and household spending fell 0.3 percent. From a year earlier, GDP shrank 1.5 percent, the only full-year drop on record.

The financial crisis is forcing companies from carmaker Volkswagen to software maker SAP to reduce output and cut jobs. The economy, which grew 0.8 percent in 2008, may shrink 4.1 percent this year, the Organization for Economic Cooperation and Development has forecast. The European Central Bank is examining non-standard measures to stimulate the economy after cutting interest rates to a record low.

"The outlook is pitch-black and it doesn’t look like we’ve reached the bottom yet," said Jens Kramer, an economist at Nord LB in Hannover, who expects a contraction of at least 2 percent in the first quarter. The ECB will have "announce what else they’ll do beyond cutting rates."

The ECB last week cut interest rates by 25 basis points to 1.25 percent, taking its reductions since early October to 300 basis points. Still, it’s lagging counterparts such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan, which have cut their key rates to almost zero and are pumping money into their economies by buying government and company securities.

The ECB is studying what else it can do to revive lending and economic growth, council members Guy Quaden and Michael Bonello told Bloomberg News in Prague after a meeting of finance ministers and central bankers on April 3 and April 4. "There is still room for maneuver and I confirm also that we are reflecting on other possible measures," Belgium’s Quaden said. His Maltese colleague Bonello said when rates are at "historically very low levels," you have to "consider all the options."