German economy shrinks in last quarter, surprise growth for France

As a result of the debt crisis hitting European neighbours, German exports slowed down as demand for German goods fell.

Europe's debt crisis has already pushed Greece, Portugal and Belgium into recession, defined by two consecutive quarters of contraction.

Economists forecast that Germany is likely to avoid that scenario and say the latest growth figures could have been worse.

Christian Schulz, an economist at Berenberg Bank expects the economic dip to be limited and is expecting growth by the second quarter of the year, provided the euro crisis remains under control.

In France there was surprise growth at the end of last year, with the economy expanding by 0.2% in the fourth quarter.

The economy was boosted by healthy growth in exports and business investment.

This comes as a boost to President Nicholas Sarkozy if he chooses to run for re-election in April.

Finance Minister Francois Baroin said "this strengthens the government's forecast for 0.5% [growth] this year."

Confidence in France was undermined in January when it lost its top-notch AAA credit rating, after one of the leading ratings agencies, Standard and Poor's, downgraded the nation's debt.

At the time the agency blamed Europe's debt crisis and the failure of Europe's leaders to tackle the region's problems.

For 2011 as a whole, the French economy grew by 1.7% and Germany 1.5%.