The 15 countries that use the euro have slumped into the first recession since the single currency was introduced in 1999, the European Commission said today.

The commission forecast that overall economic output fell by 0.1 per cent between July and September and will fall by a further 0.1 per cent in the final quarter of the year.

Official figures show that output dropped by 0.2 per cent in the second quarter. A recession is defined as two consecutive quarters of shrinking output.

If the commission's predictions prove correct, the world's second-largest economic block will join Britain and the US in recession.

The official estimates for third-quarter GDP in the eurozone will be published next week.

Joaquin Almunia, EU Economic Affairs Commissioner, said: “The economic horizon has now significantly darkened as the European Union economy is hit by the financial crisis that deepened during the autumn and is taking a toll on business and consumers."

In a broad downgrade of its estimates, the commission forecast the eurozone economy would grow by 1.2 per cent this year, but that it would practically grind to a halt next year with full-year growth of only 0.1 per cent.

It also said that the 27-nation EU economy would grow 1.4 per cent this year but would edge up by only 0.2 per cent next year.

“The situation in the markets remains precarious and the crisis is not yet over. This means weaker growth,” Mr Almunia said.

Poul Nyrup Rasmussen, President of the European Socialists, said swift action was now needed. "We don’t need more statistics. It’s clear now Europe must act fast to relaunch its economy.Our citizens cannot afford to wait. They should not pay the price for recklessness and greed in the financial markets."

Data from eurozone manufacturers show activity plunging to a record low and employment shrinking faster than at any time since early 2002.

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