Economic Outlook: Falling into a stall

Data released in Europe Tuesday show a serious risk of recession at at time when the continent's debt crisis could undermine growth.

Those issues are tied together, of course, but they do not have to be. There have been recessions in the past without governments threatening to go into default. On the other hand, a potential recession when the governments of Greece, Italy, Spain and others could put economic growth to good use could be devastating for the eurozone.

The European Commission's statistical office Eurostat Tuesday said growth in both the 17-member eurozone and the 27-member European Union rose 0.2 percent from the second to the third quarter and grew 1.4 percent from the third quarter of 2010.

In Germany, Europe's largest economy, growth reached 0.5 percent quarter to quarter and 2.5 percent from the third quarter of 2010. In France, growth reached 1.6 percent from a year earlier, but just 0.4 percent quarter to quarter.

For France, that is a return to growth after the economy shrank 0.1 percent in the second quarter.

Gross domestic product figures for Greece and Italy were not reported as there was too little data available at this point. Growth in Spain, Eurostat said, fell flat after rising 0.2 percent in the second quarter.

In the Netherlands, the economy shifted from growth to contraction, dropping 0.3 percent in the third quarter after rising 0.2 percent in the second.

Eurostat downgraded its growth forecast for the eurozone to 1.5 percent for 2011 and to 0.5 percent in 2012, The New York Times reported.

In effect, any recovery in Europe, "has now come to a standstill, and there is a risk of a new recession," said Olli Rehn, the European Commissioner for Economic and Monetary Affairs.

In London, economist Jonathan Loynes at Capital Economics concurred the risks are high. In a recent note, he said data suggest "the eurozone economy is likely to drop back into recession" for the final quarter of the year "and beyond."

In international markets Tuesday, the Nikkei 225 index in Japan shed 0.7 percent while the Shanghai composite index in China was flat, up less than 0.1 percent. The Hang Seng index in Hong Kong lost 0.8 percent while the Sensex in India lost 1.3 percent.

The S&P/ASX 200 index in Australia fell 0.4 percent.

In midday trading in Europe, the FTSE 100 index lost 0.2 percent while the DAX 30 in Germany fell 1.1 percent. The CAC 40 in France shed 1.6 percent while the Stoxx Europe 600 lost 0.6 percent.