The global financial crisis is taking an increasingly heavy toll on Europe's economy as fresh economic projections - to be officially confirmed by the European Commission on Friday (14 November) - show that the 15-strong euro area has entered recession, its first in the structure's history.

The eurozone's economy contracted by 0.2 percent between July and September 2008, following a 0.2 percent decline during the second quater of this year, the BBC reports. Two consecutive quaters of contraction amounts to a definition of recession.

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The pesimistic outlook follows Germany's announcement on Thursday (13 November) that its economy has officially plunged into recession.

The EU's most powerful economy shrunk by 0.4 percent in the second quarter and by 0.5 percent in the third quarter of 2008, with the Federal Statistics Office saying "A negative effect on gross domestic product came from foreign trade, with a strong increase in imports and weakening exports."

"We will definitely get a further contraction in the fourth quarter, probably of a similar order," Klaus Schruefer at SEB was cited as saying.

It seems, however, that France has succeeded to escape recession for now, with the country's economy expanding by 0.14 percent growth in the third quater of this year.

"The figure is astonishing because everyone was expecting a negative figure and preparing for a recession," French finance minister Christine Lagarde said, according to the BBC, adding that stable consumption and company investment helped to support the economy.

Experts predict this is just a last gasp before France slips into recession also.

Domino effect

Data on Italy and Spain are now being awaited. Rome is expected to announce that its economy shrank by 0.5 percent in the third quater of this year, while Spanish economy is reported to shrink by 0.2 percent during the same period.

The Organisation for Economic Co-operation and Development (OECD) has also put the official stamp of recession on its 30-member area, bringing together countries committed to democracy and the market economy.

According to the OECD data, economic activity is expected to fall by 0.9 percent in the US next year, by 0.5 percent in the eurozone and by 0.1 percent in Japan.

"Against this backdrop, additional macroeconomic stimulus is needed," Jorgen Elmeskov, director of policy Studies in the OECD's Economics Department, said when presenting a gloomy outlook (13 November).

G20 financial summit

The grim economic picture is leaving leaders of major developed and emerging economies with a heavy meal to digest when they meet on Saturday (15 November) to discuss the deepening crisis.

The G20 summit hosted by the US is set to primarily focus on a reform of the financial sector.

Speaking on Thursday, outgoing US president George W. Bush defended "the free market principles that have delivered prosperity."

"While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth," he said, according to Reuters, adding that "the surest path to that growth is free markets and free people."

He suggested to improve accountancy rules, co-ordination of national laws and regulations as well as to make the World Bank and the International Monetary Fund more representative.

"It would be a terrible mistake to allow a few months of crisis to undermine 60 years of success," president Bush added, labelling capitalism "not perfect," but "by far the most efficient."