Eurozone growth slowed markedly in the third quarter of this year as Germany’s rapid growth spurt lost momentum, intensifying pressure on the weakest economies in Europe’s monetary union.

Gross domestic product in the 16-country region expanded by 0.4 per cent compared with the previous three months, after increasing by 1 per cent in the second quarter, Eurostat, the European Union’s statistical office has reported.

The deceleration reduces the scope for Ireland, Greece or Portugal to lift themselves out of the current crisis by exporting to neighbours. It also showed the eurozone lagging behind the US and UK, which have reported their economies expanded by 0.5 per cent and 0.8 per cent in the third quarter.

Although slowing, Germany – Europe’s largest economy – continued to power the rest of the continent, reporting a 0.7 per cent third-quarter rise in GDP. Its statistical office also revised up the second quarter data to show a 2.3 per cent rise, even stronger than the 2.2 per cent previously reported and the fastest since the reunification in 1990.

But Gilles Moec, European economist at Deutsche Bank, warned Germany would be less of a growth motor than in the past, as its imports from other countries sharing the euro had fallen in importance. “It is an engine but we should not overstate the importance it has for the rest of the eurozone,” he said.

Jörg Kramer, chief economist at Commerzbank in Frankfurt, added: “Germany is doing well, which is a positive but it is not enough to save the rest of the eurozone ... The perception that the eurozone is drifting apart has been and remains a driver of the sovereign debt crisis.”

Friday’s figures showed Greece’s economy continuing to contract rapidly in the third quarter, when its GDP fell by 1.1 per cent, extending a 1.7 per cent fall seen in the previous three months. However, among other “peripheral” eurozone countries hit by the crisis over public finances, Portugal surprised by reporting a stronger-than-expected 0.4 per cent third-quarter expansion, building on the 0.2 per cent growth seen in the second quarter. Ireland has yet to report third-quarter data.

Elsewhere, growth remained modest. France fell short of expectations with a 0.4 per cent third quarter rise in GDP, after a 0.7 per cent rise in the second quarter. The Netherlands, which had been one of the eurozone’s better performers after Germany, shocked economists by reporting its GDP contracted by 0.1 per cent, after a 0.9 per cent rise in the second quarter. Italy reported just 0.2 per cent growth, down from 0.5 per cent. On Thursday, Spain had reported its slow recovery had ground to a halt in the third quarter, when GDP remained flat.

Germany’s economy contracted more than others after the collapse of Lehman Brothers in September 2008. Its GDP fell by almost 5 per cent last year. But the pace of its subsequent recovery surprised observers – especially the steady falls in unemployment, which now appear to be boosting consumer spending. In turn, that is reducing Germany’s reliance on exports and boosting hopes that its growth rate would remain robust even if global prospects become gloomier.

Q&A: Back on the brink of a crisis

Why are we suddenly in another eurozone crisis? The markets settled down after the European Union and International Monetary Fund bailed out Greece in May, but the troubles in other countries – particularly Ireland and Portugal – never went away, writes Peter Spiegel in Brussels. The EU had hoped the Greek bailout and other actions would buy some time to get these countries’ fiscal houses in order, but the markets got nervous much quicker than everyone anticipated.

Why? In late October, Angela Merkel, German chancellor, convinced the other 26 EU countries to reopen the EU’s treaties to set up a new bailout system in case a Greek-like crisis happened again. She has insisted this new system should force private investors to absorb a greater percentage of the cost of a future bailout so taxpayers won’t have to. This new system wouldn’t take effect until 2013, but the move spooked current bondholders by making Irish and Portuguese bonds look even more risky. They sold en masse, rasing Irish and Portuguese borrowing costs.

Will Friday’s statement by Germany and four other EU members make a difference? The statement indicated that conditions on private investors in a future bailout might be less onerous than first feared, and the bond market appeared to relax. If the market settles and Ireland and Portugal are able to borrow at relatively cheap prices, things could improve. But that is a big “if”.

Where do we go next? Finance ministers from the 16 eurozone countries are meeting in Brussels on Tuesday, and Ireland will be discussed. But the ultimate decision will be made in Dublin: will they ask for help from the temporary bailout system? Senior Irish officials insisted Friday they will be able to weather the storm without help.

How will this affect the average consumer? Market pressures and the Greek bailout were factors that have forced many of Europe’s economies to take a hard look at spending, leading several to make significant budget cuts. If Ireland and Portugal are dragged down along with Greece, Europe’s halting recovery could fail, forcing further cuts and job losses.