Euro-zone countries enter a recession

The 15 countries that use the euro as currency have entered a recession.

The European Union reported Friday that its latest figures show the economy in its 15euro-zone countries shrank 0.2 per cent for two quarters in a row.

The technical definition of a recession is two quarters of decline in gross domestic product.

A spending slowdown and tight credit conditions have been hurting industry across the continent.

"The euro-zone is not immune to what's going on in the world economy generally, and exporting nations like Germany are totally plugged into the fortunes of the world economy," said Neil Mackinnon, chief economist at financial services organization ECU Group.

"We're in for a pretty severe economic slump."

Other countries in the European Union that don'tuse the euro are also watching their economies shrink including Britain, Estonia and Latvia.

Central bank to hold rate-setting meeting

The European Central Bank is scheduled to hold a rate-setting meeting in early December and many analysts saythe bank may slashits key interest rate to 2.25 per cent from 3.25 per cent.

"The clear deterioration in the economy and ongoing signs that the euro-area corporate sector faces difficulties to access finance suggests that the ECB [European Central Bank] should be taking some insurance against the risks of what could turn out to be a much deeper downturn," said Jacques Cailloux, European economist at the Royal Bank of Scotland.

It is the first economic slump the bank has faced since the euro was introduced in 1999 and an interest rate cut could spur growth by reducing borrowing costs.

The last major recession to hit European economies was in 1993 when each country controlled its own monetary policy and could react individually to economy problems.

Independently, Germany and Italy had already declared an economicrecession in their countries. ButFrance has on itsownhasreported a 0.1 per cent growth in its third quarter.

"Whether we're in recession or not is only a technical debate," said Jean-Louis Mourier, economist at securities firm Aurel Leven.

"Both the surveys and indicators we've seen leave no doubt that in spite of this slight rebound, the economy is on quite a bad trajectory."

In Spain, third-quarter GDPwasreported as having fallen 0.2 per cent its first contraction in 15 years.

"This was as bad as expected, but next quarter will be worse and the start of next year won't be very nice either," said Giovanni Zanni, an analyst at investment bank CSFB.

Overall, the 27-nation EU has so far escaped recession due to growth in a number of countries in eastern Europe, such as the Czech Republic and Lithuania.