UK trailing as French and German economies motor

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The Independent Online

Germany, France and even Spain have surged ahead of the UK in the race for economic recovery, according to the latest data released by the European authorities.

Germany is growing at the equivalent of 6 per cent a year and those eurozone nations closest to it not far behind, but the bulk of the group of troubled peripheral nations is stumbling badly.

Portugal has returned to recession, with a 0.7 per cent decline in GDP, while Spain (plus 0.3 per cent) and Italy (plus 0.1 per cent) only look good when set next to the UK's flatlining performance.

Greece expanded by an impressive 0.8 per cent, a result described as "frankly baffling" by one economist at RBC Markets, and is viewed with some scepticism.

The European Commission revised its 2011 growth forecasts downward for the bailout countries of Greece, Ireland and Portugal.

Overall, the eurozone economy expanded by 0.8 per cent in the first three months of the year. Compared with a year ago, eurozone GDP is up 2.5 per cent, an above-trend rate of expansion for the first time since the end of the recession last year. Strong exports of capital goods to fast-emerging markets in Asia revived consumer confidence and a recovery in construction activity underpinned the German data – with GDP up 1.5 per cent on the quarter and a year-on-year growth rate of 5.2 per cent, it was the highest since reunification 20 years ago.

France's quarterly expansion of 1 per cent was driven more by consumption and the relatively pacy showing of the Netherlands, Belgium and Austria can be attributed to their links with the German economy.

In all, these "core" nations account for about two-thirds of the eurozone economy.

Analysts say that the European Central Bank (ECB) may decide that the relatively rapid growth justifies a further one or two hikes of 25 basis points each in rates by the end of the year.

Analysts say the European Central Bank may decide the relatively rapid growth in some nations justifies a further one or two rises of 25 basis points each in interest rates by the end of the year.