The eurozone has unexpectedly entered a double-dip recession, with Germany dragging the bloc into recession territory.
The latest official figures show economic contraction in Germany of -1.7% in the first quarter of 2021. The German economy is currently 5% smaller than it was before the onset of the pandemic.
Analysts referred to the decline as a “severe setback” for Germany, noting that the country was a positive driver for the entire eurozone economy at the end of last year but has become a drag on economic growth.
Overall, the eurozone shrank by 0.6% in the first quarter, after declining by 0.7% in the final quarter of last year. Two consecutive quarters of economic decline are the technical definition of a recession.
It follows an earlier recession that started in the first quarter of last year when the eurozone declined by 3.8%. The bloc then plummeted by 11.6% in the second quarter, as the economic impact of the global pandemic and lockdown measures hit home.
In the third quarter of last year, the eurozone economy recovered by more than 12%, but a subsequent new wave of the coronavirus prompted the double-dip recession.
Italy has also headed back into recession, with its economy shrinking by 0.4% in the first quarter following a 1.8% decline in the final quarter of 2020.
Spain looks set to enter another recession, declining by 0.5% in the first quarter after a period of stagnation in the final quarter of last year.
The only major eurozone economy to report economic growth in the first quarter was France, growing by 0.4% after a 1.4% decline in the final quarter of last year. However, France is facing a sharp rise in Covid-19 cases recently, which could constrain its recovery prospects.