DEBT CRISIS EFFECTS:INDICATORS FROM Portugal and Germany yesterday showed that all euro zone states are struggling to contend with the effects of the debt crisis.

Portugal’s economy shrank a greater than initially reported 0.6 per cent in the third quarter, slipping deeper into recession.

Austerity measures under a €78 billion bailout agreed with the EU and the IMF in May are expected to lead to the deepest recession since the country returned to democracy in 1974. The government projects the economy will contract 1.6 per cent this year and by 3 per cent in 2012.

Revised GDP figures for the third quarter yesterday showed a sharper contraction than the flash estimate of minus 0.4 per cent. GDP contracted by 0.2 per cent in the second quarter and 0.6 per cent in the first quarter of this year, the institute said.

The National Statistics Institute said year-on-year GDP fell 1.7 per cent, the same as in its flash estimate, after a contraction of 1 per cent in the previous quarter.

In Germany, resilience to the debt crisis engulfing its neighbours looked to be disintegrating after data showed exports posted their biggest fall in half a year in October, and the Bundesbank forecast feeble growth next year.

With many euro zone members in danger of sliding into recession, a monthly economy ministry report said Germany’s own momentum would slow in the fourth quarter and that weakness in manufacturing and construction had spread to the service industry. The Bundesbank slashed its 2012 growth forecast to 0.6 per cent, a third of the 1.8 per cent growth it had predicted six months ago and below a government forecast of 1 per cent.

With a robust expansion of 3 per cent this year, Europe’s biggest economy has been one of the few glimmers of hope as the debt crisis adds to gloom across the euro zone. The Bundesbank said it saw “considerable downside risks” due to the debt crisis. – (Reuters)