MercoPress. South Atlantic News Agency

Euro zone first quarter contraction of 2.5% surprises economists

The economies of the 16 countries of the Euro zone experienced its worst quarterly drop in GDP in the first three months of the year, shedding 2.5% according to a release from the EU statistics agency Eurostat.

The Euro zone strongest economy Germany saw its GDP fall by more than any quarter since the country's 1990 reunification, plunging 3.8% from the last quarter of 2008. The record decline in German GDP was led by falls in exports and investments, the Statistics Office said. Year-on-year the German economy shrank by 6.7%.

The German government has predicted the economy will shrink 6% in 2009. That is a more downbeat forecast than the European Commission's.

The Commission expects Germany, Europe's biggest economy, to contract 5.4% this year. It predicts a contraction of 4% across the Euro zone.

French GDP also slipped by 1.2% compared to the previous quarter, while Italian GDP fell 2.4%, the country's heaviest decline since 1980.

The fall in French GDP, reported by the statistics office Insee, was smaller than the 1.5% drop seen in the previous quarter. In a statement, the Economy Ministry said it expected the French economy to contract by 3% in 2009.

On Thursday, the National Statistics Institute in Spain said the Spanish economy suffered its largest contraction in 50 years. GDP fell 1.8% in the first quarter

Economists had forecast an ugly but less dramatic fall of 2% in the Euro zone GDP, after a drop of 1.6% in the previous quarter.

Europe's major share markets all dipped on the news, the London FTSE 100, CAC 40 in Paris and Frankfurt's DAX 30 down around a percent.