EU: Falling investment shrank euro economy in 3Q

BRUSSELS, BELGIUM: A sharp drop in investment forced the euro-zone economy to contract in the third quarter, the EU statistics agency Eurostat said on Thursday.

The quarter-on-quarter figures indicate that tight financing is the major factor behind the recession in the 15 nations that use the euro. Exports rose during the quarter and household spending was unchanged.

The European Central Bank has been urged to loosen lending _ and stoke growth _ by reducing borrowing costs. It cut interest rates to 2.5 percent from 3.25 percent on Thursday, the biggest cut in its ten-year history.

Eurostat confirmed that the euro area shrank 0.2 percent in the third quarter from the three months before. It also contracted 0.2 percent in the second quarter. Two quarters of negative growth is the usual definition of a technical recession.

The euro-zone increased exports by 0.4 percent during the quarter, Eurostat said, coming after an 0.1 percent fall in the second quarter. Imports increased by 1.7 percent.

There was no change to household spending after a drop in the second quarter.

Economic growth is often sluggish in the third quarter when many factories cool production during the summer months and many people across Europe take long vacations.

Across the entire 27-nation European Union, growth also shrank 0.2 percent in the third quarter after remaining unchanged in the second quarter.