The European Commission's economic sentiment indicator for the countries sharing the euro fell to 67.1 points in December from 74.9 points in November, hitting the lowest level since the survey began in January 1985.

The slump exceeded economists' expectations for a drop to 71.3 points by a wide margin, as polled by Dow Jones Newswires.

'December's EC survey brings more alarming evidence that the recession in the eurozone is deepening rapidly,' said Jennifer McKeown at consultants Capital Economics.

Meanwhile, the commission's indicator for the 27-nation European Union fell to 63.5 points from 70.5 points, also tumbling to the lowest level on record.

The index had already hit the lowest level since the survey began in November.

The slump in confidence was broad based, showing up in all EU countries and all sectors, according to the survey.

The EU's executive arm's separate monthly business climate indicator for the eurozone plunged to the lowest level on records going back to January 1985, dropping to a negative 3.17 points in December from a negative 2.10 in October.

Official EU data confirmed on Thursday that the eurozone economy entered its first official recession ever in the third quarter of last year and analysts said the situation has probably worsened since then.

'It seems odds-on that the region's recession deepened markedly in the fourth quarter as the financial crisis increasingly fed through to damage the real economy,' said IHS Global Insight economist Howard Archer.

'This belief is reinforced by the further sharp decline in eurozone economic sentiment to a survey record low in December, which does not bode well for business investment, employment and consumer spending over the coming months,' he added.

In further evidence of weakness, official EU data showed on Thursday that unemployment in the eurozone ticked higher in November to 7.8 per cent - the highest in nearly two years.

Economists said that the darkening economic outlook firmed the case for deep interest rates cuts from the European Central Bank, starting with its next monetary policy setting meeting next Thursday.

'The severity of the recession and the plunge in inflation ... suggest that the time to act is now. Clearly, after today's figures chances for a 50 basis point (half a percentage point) move are rising,' said Unicredit economist Aurelio Maccario. -- AFP