Pain for Germany as economy shrinks

The main engine of European growth crunched into reverse in the final quarter of last year as Germany's economy shrank by 0.25%, official figures showed today.

The data is the starkest evidence yet of the impact of the sovereign debt crisis on the
17-member single-currency bloc, which is plunging towards recession.

Despite the poor end to the year, Germany is weathering the storm in better shape than its peers and still managed 3% growth overall in 2011 - when the UK is expecting anaemic growth of just 0.9%. Germans splashed on Volkswagens and BMWs to boost private consumption while the country's unemployment also fell to the lowest
level since reunification 20 years ago
in December.

But Germany's chief number-cruncher Roderich Egeler signalled difficult times ahead for Europe's biggest economy as the he warned that the nation's "took place primarily in the first half of the year".

Forward-looking orders data also signalled a slump ahead, with orders falling at the fastest pace since the height of the financial crisis nearly three years ago as demand from outside the eurozone plummeted.