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The Crisis In The Eurozone Deepens

It seems as though even the Eurozone as a whole cannot fight the onslaught of recession in Europe with financial data released today showing that the EU economy contracted by 0.2% in the last quarter. While the figure itself may seem insignificant it is the first drop in the Eurozone economy since monetary union was first confirmed around 10 years ago.

The fall puts the Eurozone one step from a technical recession with continuous falls in two quarters confirming that any economy is technically in recession. However, it was interesting to see that while the UK continues to suffer it was France and Germany which dragged the Eurozone economy into negative growth territory. These are commonly referred to as the powerhouses of Europe and with their own economies set to fall further in the short term it does not look good for the Eurozone as a whole.

Now that the threat of recession is about to hit the Eurozone for the first time in its short history it will be interesting to see how the European Central Bank react and what action they take on the subject of interest rates. Eurozone rates are already significantly lower than those in the UK so a further reduction may actually have very little impact. An increase in public sector spending may do the trick but how this would be funded is a different matter altogether.

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