European Woes............The German economy, Europe's largest, contracted for the first time in more than two years in the third quarter, pushing it to the brink of recession.
Gross domestic product shrank 0.1 percent compared with the previous three months, after stalling in the second quarter, the Federal Statistics Office said. Consumers and the government spent less and business investment declined.
The U.S., Japan and Germany -- the world's three biggest economies -- are all shrinking for first time since the final quarter of 1974. European companies have announced more than 455,000 job losses this year, according to Bloomberg data.
``Next year will be even worse,'' Dieter Muench, chief financial officer of Ludwig Beck AG, a German clothing retailer, said in an interview.
Siemens AG said today it may sell or close parts of its mobile phone network business, and eliminate more jobs. It has already cut 10,000 jobs, or 19 percent of the workforce.
The German slump will drag European growth to a nine-year low next year, the European Commission said yesterday. The Dutch economy contracted last quarter, and Finland is in recession.
The French economy grew 0.3 percent in the second quarter, the slowest pace in 4 1/2 years, and will probably expand at the same rate in the third, analysts said. The U.K. grew 0.5 percent last quarter, less than a previous estimate of 0.6 percent, the government said today.
Pessimism
Chancellor Gerhard Schroeder yesterday abandoned a pledge to reduce the number of people out of work to 3.5 million before elections next year. Some 3.9 million people are now unemployed. Schroeder wouldn't comment on the GDP figures.
Wolfgang Wiegard, a member of the government's panel of economic advisers, known as the ``Five Wise Men,'' said yesterday he expects the economy to contract in the second half.
German business confidence slumped to the lowest in eight years last month, the Ifo institute said. Confidence fell the most in almost three decades in September.
``The U.S. attacks were more than just a temporary setback, we see that consumer spending and investment is weak,'' Rainer Hecker, chief executive officer of Loewe AG, a German maker of television sets, said in an interview.
German imports fell 2.2 percent, while exports rose 1.1 percent last quarter. Private consumption -- almost 60 percent of GDP -- declined 0.2 percent. Investment in equipment such as factory machinery slipped 1.8 percent.
European Recession
The economy shrank 0.03 percent in the second quarter, which the statistics office rounded to show no change. ``Germany now satisfies the technical definition of recession,'' said Nigel Anderson, an economist at RBS Financial Markets in London. ``That recession will feel a lot more real'' by year's end, he said.
The euro held near a 3 1/2-month low against the dollar. The currency traded at 87.71 U.S. cents compared with 87.83 cents late yesterday.
``We are likely to see a recession not only in Germany, but also in the euro zone,'' said Joerg Kraemer, an economist at Invesco Asset Management in Frankfurt.
Sputtering growth coupled with slowing inflation has prompted the European Central Bank to lower interest rates four times so far this year, by a total of 1.5 percentage points, most recently by a half point on Nov. 8. More rate reductions are welcome, executives said.
``I would have no objections at all if the ECB cut rates by another 50 basis points in the first half of 2002,'' said Loewe's Hecker.
Increased Risks
The U.S. economy, which buys about 14 percent of Europe's exports, may slip into recession. The world's largest economy shrank at an annual rate of 0.4 percent last quarter, the first contraction in eight years. U.S. imports declined for a sixth straight month in September.
HeidelbergCement AG, the fourth-largest cement maker, yesterday said full-year net income will drop as much as 40 percent amid lower demand in western Europe.
Today's figures show that ``the risks for the economy have increased,'' the Finance Ministry said in a faxed statement. ``Because of its strong presence outside Europe, the German economy is affected by the U.S. economic slowdown more than other countries.''
Germany is also expected to say tomorrow that producer and import prices fell in October, according to economists surveyed by Bloomberg News. The nation's inflation rate probably fell to 1.9 percent this month from 2 percent in October.
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