Europe today braced itself for a deep and prolonged recession after figures showed the German and French economies in sharp decline.

German gross domestic product fell 2.1% in the final quarter last year - its third successive fall and the worst performance since reunification in 1990.

"This is really Friday the 13th," declared Carsten Brzeski, an economist at ING Financial Markets. "It did not come as a surprise but still it is shocking. The only positive note of the German growth numbers is that a horrible fourth quarter can now finally be filed away. It can hardly get worse."

The French economy shrank 1.2% between October and December - its weakest quarterly performance since 1978 - having expanded by just 0.1% in the third quarter.

French finance minister Christine Lagarde said: "The first quarter will be difficult," she said. "We will have a difficult year. I think growth will be lower than minus 1%."

Pierre-Olivier Beffy of Exane BNP Paribas added: "It's a black quarter. The recession is far from over."

The figures came as finance ministers and central bankers from the G7 industrial powers - the US, UK, Japan, Germany, France, Italy and Canada - plus Russia met in Rome to lay the foundations for an international response to the global crisis.

Alistair Darling is likely to come under pressure from his European counterparts to bring the pound back under control in what could spark a "currency war".

They are expected to confront the Chancellor over the weakness of sterling, which has lost around a third of its value in recent months.

The worsening economic prospects in France and Germany reflect the situation across the rest of the eurozone. The Spanish economy shrank by 1% in the fourth quarter while Italy is also in decline.

Juergen Michels of Citigroup in London said: "The storm is not over yet. The risks for the first quarter are tilted to the downside and the outlook for the full year remains bleak."

The European Central Bank left eurozone interest rates on hold at 2% this month, but signalled it will cut in March, with markets looking for a 0.5 percentage point reduction to 1.5%.