Strong German growth helps eurozone avoid recession
The eurozone has narrowly avoided recession thanks in part to stronger-than-expected growth figures in Germany.
The eurozone recorded 0 per cent growth in the first three months of the year- a better result than many analysts predicted after it shrank 0.3 per cent in the final three months of 2011.
German growth was at 0.5 per cent, thanks largely to a strong export performance, while the French economy was flat; Spain shrank by 0.3 per cent; and Italy recorded a decline of 0.8 per cent – its third consecutive quarterly contraction.
Predictions of a eurozone contraction of 0.2 per cent placing it back into recession - officially defined as two consecutive quarters of negative growth - proved unfounded, but experts were keen to stress that the European economy was still struggling.
James Ashley, senior European economist at RBC Capital Markets, said: "The euro area might have dodged recession, but it is firing on only one cylinder.”
Greece, which is currently without a government and appears on course for another general election in June following last week's inconclusive poll, saw its economy contract by an annual rate of 6.2 percent, slightly better than the 7.5 per cent decline recorded in the previous three month period.
The Greek performance highlights the huge disparities in economic performance within the eurozone. Of the euro's 17 members, seven are in recession: Ireland, Spain, Italy, Cyprus, the Netherlands, Portugal, Slovenia and Greece.
Though a eurozone-wide recession has been avoided for now, the figures will likely be used as evidence by those urging more growth in the eurozone.
French President Francois Hollande heads to Berlin today to to discuss the state of the European economy with German Chancellor Angela Merkel. Kickstarting economic growth was central to Hollande's recent election.
Analysts expect the eurozone economy to do little more than stagnate over the coming months, with its performance potentially hinging on Greece.
Over recent days, concerns have grown that Greece will be forced to leave the euro if its politicians fail to meet the terms of the bailout agreement with international creditors.
Today's figures are subject to change however, as Eurostat - the EU's statistics office - continues to collect figures. Several countries, including Ireland and Slovenia, have yet to release quarterly figures and for Greece there are only year-on-year comparisons.
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