By Edmund Conway
and Angela Monaghan
Last Updated: 7:34PM BST 15 May 2009
The declaration was made as it
emerged that Europe's biggest economy has now suffered a worse "lost
On a day of dismal news for the
European economy, official figures also showed that
Within hours, the managing director of the International Monetary Fund (IMF) warned that the global recession is far from over and that people must prepare themselves for more financial shocks. Dominique Strauss-Kahn said the world remains in the grips of a "Great Recession" and played down talk of "green shoots".
In figures described by
economists as "disastrous", Eurostat also reported that
The sharp German contraction - the worst since the Second World War - follows news that the bill for bailing out its economy is likely to exceed the cost of re-unification in the years of austerity after the fall of the Berlin Wall. Economists said that the country's reluctance to move quickly to cut taxes and raise spending was largely to blame.
The export-reliant country has been hit hard as world trade nose-dived in the latter months of last year. Charles Dumas of Lombard Street Research said: "German economic policy is bankrupt, and the Mediterranean countries stuck in EMU are also condemned to ongoing economic collapse.
"Already we have real GDP levels that are up only about 3pc from 2000 in Germany and Italy – ie growth has been only a little over ¼pc a year – making this a lost decade for much of continental Europe on a worse scale than Japan in the 1990s."
Mr Strauss-Kahn, who was speaking
"This crisis is not yet over, and there will, in all likelihood, be further tests ahead," he said.
However, Mr Strauss-Kahn said the global economy would "almost certainly" avoid a crisis as severe of the 1930s Great Depression because of the co-ordinated action taken by world leaders.
"World leaders embraced multilateralism, and are reaping the rewards. Vehicles like the G20 were used to coordinate policies and deliver a unified message," he said.
The IMF has called for a global fiscal stimulus equal to 2pc of the world's gross domestic product.