Germany - Europe's largest economy - has announced it is in recession for the first time in five years.

The country has gone into the red for the second consecutive quarter and Britain is not expected to be far behind.

German gross domestic product (GDP) contracted by 0.5 per cent in the third quarter, data showed.

The figures underscored the risks for the broader European economy, which faces a deep and prolonged downturn, exacerbated by ongoing turbulence in the global financial system.

Germany's fortunes are crucial to the performance of the overall euro zone. Figures on euro area GDP due on Friday are expected to show a third-quarter contraction of 0.2 percent, putting the 15-nation currency zone in recession.

Germany has been the world's largest exporter of goods since 2003, profiting from a period of strong global growth.

But as boom turns to bust in many export markets, its large exposure to the global economy means Germany is suffering.

To limit the damage, Chancellor Angela Merkel's government has unveiled a package of targeted stimulus measures they say could generate investments and contracts of up to 50 billion euros.

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