Eurozone 'heading toward second recession'

Pressure up on Italian, Spanish bonds

Eurozone 'heading toward second recession'

(ANSA) - Rome, August 23 - The eurozone has been heading towards a second recession for the past three years, according to business data released Thursday that shows how the eurozone is dragging Germany into the economic crisis. August figures from the Markit Economics index of purchasing managers in the eurozone said that the region's GDP was due to contract by 0.5% to 0.6% in the third quarter of 2012. It would be the second consecutive quarter of negative growth, which technically constitutes a recession. Eurozone GDP registered a 0.2% loss in the second quarter this year. Germany, which earlier Thursday reported 0.3% growth in GDP, has served as as bedrock of the European economy amid the crisis, helping the region avoid an even sharper decline. But product and manufacturing information (PMI) Thursday showed the eurozone's biggest economy suffered an unexpected contraction in August, down to 48.3 points from 50.3 on the Markit index. The country also registered its seventh consecutive private-sector contraction, with a steep downturn in new business for companies and a shrinking service sector, prompting investors to fear that the mighty German economy is being pulled into the eurozone crisis. The spread between 10-year Spanish bonds and the German benchmark bund, an indicator of investor confidence in the heavily indebted country's ability to weather the euro crisis, was at 502 points, surpassing the psychologically important 500-point threshold, with a yield of 6.39%. The equivalent spread between Italian and German bonds was 427, up from 420, with a yield of 5.67%.

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