TECHNICAL RECESSION REGISTERED

    In the third quarter, the 15-nation eurozone was officially in its first recession since the introduction of the single currency in 1999.

    Figures from the EU's statistics office Eurostat showed the eurozone economy shrank by 0.2 percent in the third quarter, after registering the same reading in the previous quarter.

    In technical terms, recession is broadly defined as negative growths in two consecutive quarters.

    It was expected the eurozone economy will deteriorate further in the last quarter of 2008 and growth is unlikely to restore before the end of next year.

    In November, the European Commission slashed its growth forecast for the eurozone. It was estimated that the eurozone economy will grow by 1.2 percent, less than half of what it was in2007, and is set to grind to a standstill at 0.1 percent in 2009 before recovering to 0.9 percent in 2010.

    Both the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) predicted the bloc's economy will contract by at least 0.5 percent next year, a view shared by EU Economic and Monetary Affairs Commissioner Joaquin Almunia and ECB President Jean-Claude Trichet.

    "The economic horizon has now significantly darkened as the European economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumer confidence," said Almunia.

    In November, economic confidence in the eurozone has declined to its lowest level since August 1993, according to the Eurostat, pointing to a further deterioration in economic activities in the year ahead.

    GROWTH ENGINES LOSING STEAM

    Currently, all of the three engines which power the eurozone economic growth, namely investment, private consumption and exports, are losing steam.

    Due to the credit crunch in the wake of the ongoing financial crisis, investment in the eurozone was most severely hurt, dropping by 0.6 percent in the third quarter after a fall of 0.9 percent in the second quarter.

    In addition, the eurozone unemployment rate is set to rise in the coming two years, dampening private consumption, and the external demand for eurozone exports is also fading.

    The only good news is that the inflation pressure in the eurozone eased in recent months, thanks to the significant drop in oil prices, which allowed the ECB more room for rate cut to support the economy.

    The Frankfurt-based bank has slashed its benchmark interest rate in two months for three times, the boldest move since its establishment in 1998.

    EU leaders also agreed at a summit last week on a 200-billion-euro (273-billion-U.S.dollar) stimulus package to coordinate their national responses to ride out the economic crisis.

    The sum amounts to 1.5 percent of the EU's Gross Domestic Product (GDP), with 1.2 percent coming from EU governments and the rest from EU funding, but whether the package can lift the eurozone economy out of recession remains in doubt.