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Euro economy shrinks 0.2%, estimates show

August 15, 2008|From the Associated Press

BRUSSELS — Europe's economy has contracted for the first time since the introduction of the euro almost a decade ago.

Gross domestic product in the euro zone shrank 0.2% in the second quarter of the year, EU estimates showed Thursday, raising recession fears. Germany, France and Italy braked sharply, with high fuel and food prices holding back consumer spending.

European business and consumer confidence was at the lowest level in more than five years in July, with inflation hovering at its highest point since 1996 and the jobless rate climbing from an all-time low.

No euro country is officially in recession, which is defined as two consecutive quarters of negative growth -- although Ireland may be once it publishes a figure for the second quarter. The once-booming "Celtic tiger" economy contracted in the first three months of the year.

Output in the 15 economies that share the euro currency contracted 0.2% in the April-to-June period in comparison with the first quarter, expanding just 1.5% from the same period a year earlier, the EU statistical agency Eurostat said in its early estimate, which it may update Sept. 3.

Germany, the region's largest economy, shrank 0.5% in the second quarter from the first, and France and Italy were both down 0.3%. German output dropped for the first time in nearly four years.

July inflation was still high but less than anticipated at 4% -- the same as June.

The broader 27-nation European Union saw output fall 0.1% from the previous quarter; it is up just 1.7% from the period in 2007.

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