Euro-area economic data due this week will probably show the damage inflicted by the region’s sovereign debt crisis with the worst quarterly decline in output for almost four years.
Gross domestic product shrank 0.4 percent in the fourth quarter, according to the median of 45 estimates gathered by Bloomberg News. That would be the biggest decline since the first quarter of 2009, when GDP fell 2.8 percent in the wake of the collapse of Lehman Brothers Holdings Inc. The data is due to be published on Feb. 14.
“The fourth quarter was a double whammy for Europe, with austerity and exports to the U.S. falling off,” said Gilles Moec, co-chief European economist at Deutsche Bank in London. In the first quarter “there should be a gradual acceleration in external traction to help lift us out of that predicament.”
President Francois Hollande is battling with jobless claims at a 15-year high as companies including PSA Peugeot Citroen, Renault SA and Alcatel-Lucent SA cut tens of thousands of jobs. He’s also struggling to slash the state budget deficit to 3 percent of GDP this year from 4.5 percent in 2012 -- a target that the European Commission and the International Monetary Fund expect to be missed unless further action is taken.