Germany and Italy are flirting with recession while eurozone business growth has slumped to a four-year low, leaving the region nakedly exposed to the possible shock of a no-deal Brexit.

The closely watched IHS Markit index of German manufacturing fell to 50.2 in November, close to the ‘boom-bust line’ that divides growth from contraction. It is the weakest level since the tail-end of eurozone banking crisis in 2013. Foreign export orders fell to a six-year low.

Germany’s data office Destastis confirmed on Friday that the country’s economy contracted by 0.2pc in the third quarter. It blamed crumbling global demand and disruption in the car industry from new vehicle test standards called WLTP.

Italy’s economy has also stalled. Peter Praet, the European Central Bank’s chief economist, warned that the country is uncomfortably close to a fresh crisis as the budget showdown between Brussels and the insurgent Lega-Five Star coalition in Rome continues to escalate.

Risk spreads on 10-year Italian bonds have been stuck above 300 basis points for nearly two months, gradually tightening the noose on the economy. Italian banks are mostly unable to roll over their bonds, forcing them to curb lending. Mortgage rates are being reset upwards. “No country can sustain such high spreads for a long time,” he said.