European recovery rocked by poor economic data in Spain and Italy A key gauge of private sector activity across the eurozone suggested business activity contracted in February after showing tentative signs of growth a month earlier. Markit's eurozone composite PMI fell to 49.3 - revised down from an initial reading of 49.7 - from 50.4 in January, where anything below 50 shows a contraction. The poor data, which suggest the region is slipping back into recession, pushed markets lower, with the Ibex in Spain down 1.3pc and Italian markets 0.7pc lower. The data also heightened concerns that the austerity measures pushed by European policymakers are merely serving to cut off growth in already hard-hit countries. Markit said its reading for Spain's services sector, which accounts for 70pc of the economy, fell from 46.1 to 41.9, against forecasts for a decline to 45.9. The services sector in Italy fell from 44.8 to 44.1, with employment shrinking at its fastest rate since July 2009, while the Bank of Italy predicted the country's economy was set to shrink by 1.5pc this year. That compares with the Italian government's forecast of a 0.4pc contraction. "It will put a dent in hopes that the fourth-quarter contraction was a one-off for the eurozone as a whole but the most worrying development is the continued weakness of the southern European measures," said Ben May at Capital Economics. The European Central Bank is going to be setting policy for the region as a whole and not for individual economies and it is likely that policy is going to be less accommodative than, say, Spain or Italy would choose. Shares were also pushed lower amid growing worries over the Greek situation, with finance minister Evangelos Venizelos warning his country was ready to activate collective action clauses (CACs) to enforce losses on private sector creditors if they do not accept the country's debt swap offer this week. Such a move would effectively trigger a default in Greece's debt. The government was handed a fillip, however, as a major group of creditors agreed to back the swap. Twelve institutions in bank lobby group the Institute of International Finance - including Deutsche Bank and BNP Paribas - agreed to back the plan. The warning came as Amadeu Altafaj, a spokesman for EU economy commissioner Olli Rehn, branded news that Spain is set to miss its budgetary targets as "serious" and "grave." Spanish prime minister Mariano Rajoy said on Friday that Madrid could not hope to meet its budgetary targets for 2012.