REFILE-UPDATE 1-Euro zone skirts slump, reprieve seen short-lived

* Q2 GDP contracts 0.2 percent
* Q1 GDP flat after earlier treading of 0.1 pct decline
* Debt crisis, austerity programmes mean outlook poor

BRUSSELS, Aug 14 (Reuters) - The euro zone economy narrowly
skirted recession in the first half of the year, but austerity
programmes across the region and a debt crisis weighing ever
more heavily on its periphery suggest the reprieve will be
short-lived.
Gross domestic product (GDP) shrank by 0.2 percent in the
second quarter from the first after risk-averse businesses and
consumers reined in spending, European statistics agency
Eurostat said on Tuesday.
Quarterly growth flatlined in January-March, meaning the
region averted the two consecutive quarters of contraction that
define a recession. Eurostat revised up the year-on-year GDP
figure for that period to zero from a 0.1 percent contraction.
Europe's debt crisis intensified during the second quarter,
with Greece coming closer to an exit from the single currency
and Spain struggling with a banking crisis that pushed its
borrowing costs to danger levels.
Analysts agree the gloomy picture is not about to change.
"What we see is a vicious circle of budget cuts, high
interest rates in the periphery and sovereign debt rising," said
Aline Schuiling, an economist at ABN AMRO. "There is still a lot
of uncertainty related to the crisis."
A decline in GDP from the end of last year levelled off in
the first quarter of 2012 as exports offset a plunge in
investment and inventories.
"The economy is avoiding recession by the skin of its teeth,
but it will be a temporary reprieve," Kenneth Wattret, economist
at BNP, said.
"You could argue we have one leg in the recession already,"
said Martin Van Vliet, economist at ING. "Leading indicators
point to a further contraction in the third quarter, so we might
indeed see a technical recession."
Tuesday's flash GDP estimate for the second quarter was in
line with the average of economists' expectations as polled by
Reuters.
Industrial production, a key component of GDP, fell 0.6
percent in June from May and 2.1 percent compared to June 2011,
another reading from Eurostat showed. This was slightly above
forecasts of a 0.7 and 2.2 percent fall respectively.
Earlier on Tuesday, Germany posted modest growth in the
second quarter, while France stagnated, as Europe's core gets
drawn further into to the debt crisis.
German analyst and investor sentiment also dropped for a
fourth straight month in August, undercutting even the lowest
forecast in a Reuters poll, a survey showed on Tuesday.