Manufacturing in the Euro Zone contracted for the eighth consecutive month in March, signalling the potential for the world's second-largest economic bloc to slip back into recession.

The figures, which came shortly after news that unemployment in the region hit the highest level since the introduction of the single-currency in 1999, will add to investor concerns that the ongoing sovereign debt crisis may still be affecting growth.

Markit Economics' Purchasing Manangers Index (PMI) for the month of March fell to 47.7 from 49 in February, the London-based group said Monday. A reading of 50 or above typically indicates economic expansion, while a reading below 50 is often a sign of contracting economic activity.

Stock markets around the region reversed earlier gains after the two reports were released, with the broader FTSE Eurofirst 300 index slipping into negative territory by mid-day London time. The index was last changing hands at 1,068.61, little-changed from Friday's close.

The euro slid sharply, however, to a session-lows against the US dollar ($1.3285) and the Japanses Yen (109.34).

The ongoing debt crisis - and the austerity measures that it has created - are the two largest investor concerns for growth in the region.

Spain Friday revealed the steepest budget cuts in more than 30 years as it attempts to meet the EU's mandated deficit target of 5.3 percent for 2012. The spending cuts amount to €27bn and include a 17% reduction in government ministers' pay.

Euro zone leaders also Friday temporarily expanded the so-called firewall designed to protect Europe from another Greek-style sovereign default.

Under the plan approved Friday, the euro zone's temporary €440 billion ($588 billion) European Financial Stability Facility, or EFSF, will now operate for one year alongside the permanent €500 billion European Stability Mechanism, or ESM, which takes effect in July, for a total of €940 billion.