By Aidan Meikle

Following on from the article yesterday afternoon, Europe’s recession does in fact deepen.  So why is confidence growing in the Eurozone??  Why are the Europeans confident with the way that their governemnts are handling the recession well, when the data releases suggest the recession is getting worse?  It doesn’t look good.

Check out the article from Bloomberg here, or read it below:

Europe’s recession deepened more than estimated in the fourth quarter after companies scaled back production and consumer spending declined.

Gross domestic product in the euro region declined 1.6 percent from the previous three months, the most in at least 13 years, the European Union’s statistics office in Luxembourg said today, revising down a March 5 estimate of a 1.5 percent contraction. Investment plunged 4 percent and household spending fell 0.3 percent. From a year earlier, GDP shrank 1.5 percent, the only full-year drop on record.

The financial crisis is forcing companies from carmaker Volkswagen AG to software maker SAP AG to reduce output and cut jobs. The economy, which grew 0.8 percent in 2008, may shrink 4.1 percent this year, the Organization for Economic Cooperation and Development has forecast. The European Central Bank is examining possible new non-standard measures to stimulate the economy after cutting interest rates to a record low.

“The outlook is pitch-black and it doesn’t look like we’ve reached the bottom yet,” said Jens Kramer, an economist at Nord LB in Hannover, who expects a contraction of at least 2 percent in the first quarter. The ECB will have “announce what else they’ll do beyond cutting rates.”

The euro extended its declines after the report, dropping 1.1 percent to $1.3276 as of 10:18 a.m. in London. European government bonds slipped, with the yield on the 10-year bund, Europe’s benchmark government security, rising one basis point to 3.21 percent.

‘Room for Maneuver’

The ECB last week cut interest rates by 25 basis points to 1.25 percent, taking its reductions since early October to 300 basis points. Still, it’s lagging counterparts such as the U.S. Federal Reserve, the Bank of England and the Bank of Japan, which have cut their key rates to almost zero and are pumping money into their economies by buying government and company securities.

The ECB is studying what else it can do to revive lending and economic growth, council members Guy Quaden and Michael Bonello told Bloomberg News in Prague after a meeting of finance ministers and central bankers on April 3 and April 4.

“There is still room for maneuver and I confirm also that we are reflecting on other possible measures,” Belgium’s Quaden said. His Maltese colleague Bonello said when rates are at “historically very low levels,” you have to “consider all the options.”

Unemployment Rising

Euro-area exports fell 6.7 percent in the fourth quarter from the previous three months and imports dropped 4.7 percent, according to today’s report.

While the rate of contraction in European manufacturing and services industries may be easing, European leaders face increasing pressure as unemployment continues to increase, crushing consumer confidence.

The euro area jobless rate jumped to 8.5 percent in February, the highest in almost three years. The OECD expects the ranks of jobseekers in the Group of Seven nations to soar to 36 million by the end of next year, almost double the level of mid-2007. Euro-area consumer sentiment fell to a record low last month, according to the European Commission.

“Employment is being destroyed because of the crisis,” EU Monetary Affairs Commissioner Joaquin Almunia said on April 4. “We are dealing with the social consequences of the crisis not only at the national but at the European level.”