German economy shrinks 0.2% in fourth quarter

Europe's debt crisis has hit demand for German exports

The German economy shrank 0.2% in the final three months of last year.

Germany saw exports slow down as the debt crisis hit its European neighbours and their demand for German goods.
There was worse news for the Netherlands, where the economy sank into recession after a sharp 0.7% contraction from the previous quarter.
But in France there was surprise growth at the end of last year, with the economy expanding by 0.2% in the last three months of the year.
The economy was boosted by healthy growth in exports and business investment, which will come as a boost to President Nicolas Sarkozy.
If he chooses to run again, Mr Sarkozy faces a national election in April.
'Better than feared' For 2011 as a whole, the French economy grew by 1.7% and Germany 1.5%.

Continue reading the main story

“Start Quote

Greece may be burning. Growth may be slowing. But the recognised German barometer of hope over fear shows far more Germans looking on the bright side than those down in the dumps”

End Quote

Stephen Evans BBC News, Berlin

---

• Germany looks on the bright side

Europe's debt crisis has already pushed Greece, Portugal and Belgium into recession, defined by two consecutive quarters of contraction.

Economists forecast that Germany is likely to avoid that scenario and say the latest growth figures could have been worse.
"This is better than feared after retail sales and industrial production turned out badly in December. The decline is due to the euro crisis. It caused a drastic loss in confidence among companies and consumers." said Christian Schulz, an economist at Berenberg Bank.
"Action from the ECB and the government has restored confidence. There is hope that we will emerge quickly from the economic dip. We expect growth again in the second quarter at the latest, provided that the euro crisis remains under control." he said.
The French growth figures were better than forecast, with many analysts having expected the economy to have contracted in the fourth quarter.
"Each of the three main components of the economy - foreign trade, household consumption and investment - had a positive contribution in the last quarter of 2011." said Finance Minister Francois Baroin in a statement.
"This strengthens the government's forecast for 0.5% [growth] this year."
Confidence in France was undermined in January when it lost its top-notch AAA credit rating, after one of the leading ratings agencies, Standard and Poor's, downgraded the nation's debt.
At the time the agency blamed Europe's debt crisis and the failure of Europe's leaders to tackle the region's problems.