Eurozone gap widens as stagnation grips south

The eurozone economies are diverging at an increasingly rapid pace, with the northern powerhouses led by Germany accelerating strongly while southern countries stagnate, data showed today.

Although the region's overall growth held up this month, near-record expansion in Germany and strong improvements in France almost single-handedly kept the region's economy in positive territory in the Markit Purchasing Managers Index poll.

Markit analyst Chris Williamson said: "When you strip France and Germany out of the figures, in December growth of activity across services and manufacturing slowed down almost to stagnation."

The figures highlighted the perilous state of the region and the need for European leaders to take decisive action at this afternoon's summit, where the stability fund used to bail out troubled countries could be expanded to ease nerves about Spain's position.

Marie Diron, senior economic adviser to Ernst & Young's committee on eurozone forecasts, predicted that southern countries like Spain, with its property market collapse, would pull the overall region's growth down to just 1.4% next year despite the best efforts of their northern neighbours.

The PMI index score, in which anything above 50 is an increase, slumped to 53.7 in December from 55.4 in November. Greek unemployment hit a 10-year high of 12.4%.