Eurozone services sector in record contraction

BRUSSELS (AFP) - Service sector activity in the 16 countries using the euro slumped to the lowest level on record in February although it was not as bad as first thought, according to a survey on Wednesday. The eurozone service sector activity index, compiled by data and research group Markit, fell to 39.2 points in February from 42.2 points in January, marginally above a first estimate of 38.9 points. Markit said that the slump, marking the ninth consecutive month of decline, brought the index to the lowest level in the survey's 10-and-a-half-year history. Economist Howard Archer at consultants IHS Global Insight said that the survey painted an extremely weak picture of the vast sector, boding ill for the broader eurozone economy. "The eurozone service sector continues to be hit very hard by the financial crisis, weak consumer expenditure, reduced business spending, housing market slowdowns in a number of countries... and contracting activity in key export markets," he said. Separately, Markit said its eurozone's purchasing managers' index (PMI) dropped to 36.2 points in February from 38.3 in January, in line with a first estimate. Meanwhile, the European Union will extend a helping hand to any member state, whether in the eurozone or not, facing a financial meltdown, European Commission chief Jose Manuel Barroso assured on Wednesday. "We are considering all options. We are monitoring the situation inside the eurozone and outside the eurozone, and I am sure that we are going to respond to any difficult situation," he told journalists in Brussels. EU leaders rejected a Hungarian plea on Sunday for plans for a regional package to help eastern European nations cope with an increasingly dire economic and financial crisis, opting instead to help on a case-by-case basis. While the EU has a 25b-euro ($31b) standing credit facility available for non-euro members of the 27-nation bloc, there is no similar arrangement for eurozone members that run into difficulties meeting their debts. In the absence of a mechanism for helping eurozone countries in trouble, concerns are growing about whether and how a euro country could be assisted if one were to find itself unable to meet its financial obligations. Increasingly risk-averse investors are demanding higher interest rates on debt issued by high-deficit members of the eurozone, fuelling fears of such worst case scenarios. "We are considering all options and we believe that we have instruments in Europe to react" if a country were threatened by default, Barroso said.

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