File photo: Agencies

The European economy was hit by its sharpest recorded contraction in the second quarter, with GDP down 12.1 percent in the eurozone and 11.9 percent across the EU.

The official Eurostat agency said that, with much of the economy paralysed by coronavirus lockdowns, the fall was "by far" the largest since it began recording the figure in 1995.

"It is a shocking drop, but completely understandable as the economy was shut for a considerable period during the quarter," said Bert Colijn, senior economist at ING Bank.

"It therefore doesn't tell us all that much about the general state of the economy, which is usually why one would look at GDP figures in the first place."

The figures suggest that the decline has been similar in major economies Germany, France and Italy, but analyst Colijn warned that Spain is facing a "prolonged slump".

If countries continue to relax their coronavirus measures there could be a fairly rapid recovery, but analysts played down the chance of a immediate "V-shaped" rebound.

"The hard part of this recovery is set to start about now," Colijn said.

Meanwhile Eurozone inflation rose slightly to 0.4 percent in July.

The figure is up on June's 0.3 percent but is still well off the European Central Bank's target of just below two percent, according to Eurostat.