The German economy, the largest in Europe, shrank by a worse-than-expected 2.1 per cent in the final three months of last year, its worst quarterly performance since reunification in 1990.

At the same time the French Economy Minister warned that her country, having recorded a quarter of negative growth, would fall into recession this year.

The figures came as finance ministers and central bankers from the G7 industrial powers — the US, Japan, Britain, Germany, France, Italy and Canada — and Russia were preparing to gather in Rome today for a series of meetings over two days that will show whether governments worldwide can respond effectively to the worst financial and economic crisis since the Second World War.

The German Federal Statistics Office said that the 2.1 per cent contraction between October and December, compared to a 0.5 per cent decline in the previous quarter,was led by a decline in investment and net trade.

Since 1990 the German economy had never contracted by more than 1.2 per cent in a quarter, according to Bundesbank data.

The consensus forecast from economists last week was for a fall in GDP of 1.8 per cent between October to December compared with the same period in 2007.

The final three months of last year marked the third quarter in a row in which the economy had shrunk.

The last time this happened was between late 2002 and early 2003. The Government has already indicated that further contraction is likely in the first quarter of this year.

Adjusted for working days, German GDP contracted by 1.7 per cent on the year in the fourth quarter.

In France, Christine Lagarde, the Economy Minister, who in August asserted that it was "out of the question to talk of recession", said that her country would plunge into recession this year.

She said that she expected 2009 to be a “difficult” year during which the economy would probably contract by more than 1 per cent.

“The first quarter will be difficult ... We will have a difficult year ... I think growth will be lower than -1 per cent,” Ms Lagarde told RTL radio.

She was speaking the day after the statistics office said that French GDP had contracted by 1.2 per cent in the fourth quarter of 2008.

The official definition of a recession is two successive quarters of negative growth.

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