European stocks fall; Germany enters recession after 1Q GDP falls

European stock markets fell on Thursday as statistics revealed that Germany, the region’s largest economy, fell into recession in the first quarter of the year.

At 03:15 ET (07:15 GMT), the DAX index in Germany was down 0.2%, the FTSE 100 in the United Kingdom was down 0.4%, and the CAC 40 in France was down 0.3%.

German first-quarter output fell 0.3% from the previous three months, following a 0.5% dip between October and December, according to data released earlier Thursday. As a result, Europe’s key growth engine experienced a winter recession.

“The reluctance of households to buy was apparent in a variety of areas,” the German statistics office said in a statement. “Households spent less money on food and beverages, clothing and footwear, and furnishings.”

The June GfK consumer mood survey also revealed that German sentiment remained sluggish throughout the year, with the index only marginally improving to -24.2 in June from -25.7 the previous month.

Despite this bleak picture, Governing Council member Bostjan Vasle stated in an interview with a Slovenian newspaper on Thursday that the European Central Bank must raise borrowing costs further in order to bring inflation to its aim.

Vasle joins several other members of the ECB’s 26-member Governing Council in asking for more rises that might go into the summer.

Investors are particularly concerned about the sluggish pace of development in discussions to raise the United States’ debt ceiling.