BRUSSELS, Belgium - August 14, 2008 - Europe today edged closer to recession for the first time since the single currency was introduced in 1999, after the economy shrank by 0.2 per cent during the second quarter.

Output in the 15-nation euro zone during the three months to June fell from a 0.7 per cent increase in the first quarter. Overall, annual growth in Europe slowed from 2.1 per cent to 1.5 per cent.

It also emerged that European inflation remained at a record high of 4 per cent in July.

Last month's inflation figure was revised down from an initial estimate of 4.1 per cent, but remains at double the European Central Bank's target of close to 2 per cent.