The eurozone managed only modest economic growth in the first quarter of this year, with Germany’s performance, held back by the bitter winter, failing to kick-start a broader recovery in the 16-country region.
Eurozone gross domestic product expanded by just 0.2 per cent compared with the previous three months, Eurostat, the European Union’s statistical office said.
Germany surprised by also reporting a 0.2 per cent increase, in spite of fears that the exceptionally cold weather had stalled its economic recovery. Italy’s economy also fared better than expected, expanding by 0.5 per cent. But France and Spain reported increases of only 0.1 per cent – although that at least marked the end of Spain’s recession.
Greece’s economy contracted by 0.8 per cent – the same pace as at the end of 2009, suggesting its recession remained intense.
The data highlight how continental Europe’s largest economies continue to struggle in the aftermath of their worst downturn since the second world war, with prospects clouded by the crisis over public finances and dependent on robust growth elsewhere in the global economy. In contrast, the US reported a 0.8 per cent increase in first-quarter GDP.
“The eurozone is being left behind by the US, which is experiencing a strong V-shaped recovery,” said Nick Kounis, economist at Fortis Bank in Amsterdam. The US fiscal stimulus would be bigger this year than in 2009 but aggressive controls on public finances as a result of the crisis that started in Greece would hit eurozone growth, he said.
Germany’s economy, however, has a good chance of catching up the losses caused by the winter weather, and the latest data set the stage for a further rebound in the current quarter. Buoyant business optimism and surging exports have all provided evidence that growth in Europe’s largest economy has accelerated markedly in recent months.
Germany’s revival will boost hopes that the eurozone recovery will not be thrown completely into reverse by the crisis over public finances – especially if the European Union’s €750bn emergency plan succeeds in stopping its spread into a much broader crisis
The weaker euro already appears to be benefiting eurozone exporters and the European Central Bank last week noted that “some strengthening [in growth] appears to be taking place during the spring”. Since early December, the euro has fallen by 10 per cent on a trade-weighted basis.
Eurostat gave no breakdown of the latest GDP figures, but Germany’s statistical office said exports and investment in machinery and equipment had made a positive contribution to the country’s growth rate. Construction, however, acted as a brake as building work was delayed by the weather.
Weak consumer spending also slowed German growth in the first quarter – and could fuel fresh complaints from other eurozone countries that Berlin is failing to do enough to stimulate domestic demand.
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