Germany and France powered an unexpectedly strong eurozone growth spurt at the start of this year that outpaced the US and cast a shadow over the UK’s much weaker recovery.

Germany’s economy grew 1.5 per cent in the first quarter, lifting activity in Europe’s largest economy back over the previous 2008 peak. France announced a
1 per cent expansion in gross domestic product compared with the previous three months.

The strong growth highlighted how much of the eurozone has put the economic crises of the past three years behind it – and could help ease the 17-country region from its debt crisis. Even Greece, where a €110bn ($155bn) international bail-out launched last year is running into trouble, provided a positive surprise. Greek GDP grew 0.8 per cent – after contracting sharply for the past four consecutive quarters.

Across the eurozone, economic activity expanded by 0.8 per cent, twice as fast as first-quarter growth in the US. In France, Christine Lagarde, finance minister, declared that the country’s growth “machine has started again”.

Philipp Rösler, Germany’s new economics minister, said: “Germany is the growth motor among the industrial nations – and not just in Europe.”

However, Friday’s eurozone growth data underlined the region’s north-south divide. Growth in Spain and Italy remained sluggish with first-quarter GDP rising by just 0.3 per cent and 0.1 per cent. Portugal fell back into recession with GDP contracting by a further 0.7 per cent.

Germany’s recovery from the 2009 downturn has been far swifter than expected – boosted by tumbling unemployment and strong global demand for its industrial exports. First-quarter GDP was 5.2 per cent higher than a year earlier, the steepest year-on-year rise since reunification in 1990.

The US has also seen economic activity back above its pre-crisis peak. In contrast, the UK’s GDP must still grow 4 per cent before its economy produces the same as it did three years earlier.

Over the past six months, while France’s economy grew 1.3 per cent and Germany’s by almost 2 per cent, the UK economy was stagnant with zero growth.

Britain’s economic predicament sparked a political clash with Ed Balls, opposition Labour party finance spokesman, lambasting life in the economic “slow lane”. The prime minister’s spokesman said that it was “good news” that the largest eurozone economies were growing rapidly, and that Britain was held back because it had been “particularly affected by the banking crisis”.

The UK Treasury said that Germany was able to grow so strongly only because it had already taken the tough measures to reduce borrowing and now had a deficit much smaller than Britain’s.

“These figures show the huge risks George Osborne [finance minister] is taking in Britain by making a political choice to cut further and faster than any other major economy in the world,” he said.

Brussels, meanwhile, struck a cautious tone, raising its 2011 GDP growth forecast only modestly, from 1.5 to 1.6 per cent – and keeping the 2012 outlook steady at 1.8 per cent growth.

Olli Rehn, economic affairs commissioner, warned of continuing high levels of unemployment across the eurozone, falling only to 9.7 per cent next year from 9.9 per cent now.

Additional reporting by Peggy Hollinger in Paris

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