Bloomberg News

Euro Economy to Shrink in Second, Third Quarters, Institutes Say

July 04, 2012

The euro-area economy will contract in the second and third quarters of this year, three economic research institutes predicted.

The economy of the 17-nation currency area shrank 0.2 percent in the second quarter and will contract 0.1 percent in the third before posting 0.1 percent growth in the final three months of the year, the Ifo, Insee and Istat institutes said today in an e-mailed statement. The European Commission forecasts the economy will contract 0.3 percent overall this year.

“Unfavorable labor-market conditions and impacts of fiscal consolidation will continue to dampen household disposable income,” the institutes said. At the same time, “global demand is projected to improve moderately and net exports will be the main driving force of the mild recovery over the forecast horizon.”

The institutes said inflation is expected to slow to 2 percent by September, reflecting diminishing pressures from global commodity prices and weak internal demand.

To contact the reporter on this story: Jeff Black in Frankfurt at

To contact the editor responsible for this story: Craig Stirling at

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