Nicholas Kulish & Jack Ewing
January 16, 2013

German economy, Europe’s last hope, begins to slump. Despite a drumbeat of optimistic forecasts from economists and upbeat statements from various European leaders, the actual news on the economy continues to be grim, with figures released Tuesday showing that Germany, the continent’s flagship
economy, contracted by about 0.5% in the final months of last year.

Combined with a flurry of disappointing results in other major economies, the stumble raised questions about Europe’s ability to escape recession.

Portugal’s central bank cut its economic forecast for the year on Tuesday, saying its economy will contract more steeply than expected. France said it was likely to miss its target for narrowing the budget deficit, raising the prospects of deeper spending cuts and additional taxes. Last month, Britain said its austerity budgets would extend three extra years, to 2018, because of weaker than expected growth.

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