May 26, 2024

Germany and France Bolster the European Economy

As a result, the European Commission said in its spring forecast that prospects for 2011 looked “slightly better” than six months ago.

But it also raised some caveats, noting that the pace of recovery would be uneven across the 17-nation bloc for some time to come, that inflation remained a worry and “moreover, despite some improvement in labor markets, the prospect is for a rather jobless recovery.”

The powerhouse in Europe in recent months has been Germany, but the latest data showed that France was catching up. The two countries together account for nearly half the euro zone’s economic output.

The German Federal Statistics Office reported that gross domestic product grew 1.5 percent over the previous quarter, when harsh weather held growth to just 0.4 percent.

The figure was well above analysts’ estimates and showed that Germany’s economy had recovered fully from its worst recession since World War II. “The precrisis level of early 2008 has been exceeded,” the office said.

France, too, surpassed expectations with growth of 1 percent, the steepest increase since spring 2006, according to the statistics office Insee. That compared with an increase of just 0.3 percent in the last quarter of 2010, and a median forecast of economists surveyed by Reuters and Bloomberg News of 0.6 percent.

Over all, G.D.P. grew 0.8 percent in the euro area compared with the pace in the previous quarter, according to the European Union statistics office, Eurostat, somewhat better than economists had expected.

But the strains of austerity measures to rein in gaping deficits were evident as well.

Spain’s economy grew only 0.3 percent from the previous quarter, according to the National Statistics Institute in Madrid. Although that was slightly better than expected, it was largely attributed to exports amid weak domestic demand and high unemployment.

Portugal posted its second quarter of contraction, with its G.D.P. dropping 0.7 percent, according to Eurostat. The country is bracing for continued economic struggles as it awaits a 78 billion euro ($112 billion) bailout by the European Union and the International Monetary Fund. With the Finnish Parliament approving the bailout on Friday, European finance ministers are expected to sign off on the package early next week.

That approval had been threatened by the True Finn Party, which opposes bailouts.

Another struggling country, Greece, registered its first quarter of growth since 2008. Output grew 0.8 percent in the first quarter, according to Eurostat, compared with a decline of 2.8 percent in the final quarter of last year.

European stock markets and the euro both slipped lower. While economists called the reports encouraging, especially for Germany and France, they warned that keeping up the momentum would be difficult.

“Looking forward, we expect growth to slow down to more moderate rates, as world trade growth loses some momentum and fiscal policy tightening and higher oil prices kick in,” Aline Schuiling, senior economist at ABN Amro Bank in Amsterdam, wrote in a note. “Nevertheless, the German economy should continue to outperform the euro zone average by a wide margin.”

Oscar Bernal, an economist at ING Bank in Brussels, said that the pickup in industrial activity in France in particular “might just be a catch-up” after the year-end lull.

“All in all, we believe that the first-quarter G.D.P. growth acceleration will only be temporary,” he said, adding that the French government will still face difficulties meeting its budget-deficit reduction targets.

Strong demand for exports like automobiles has fueled the recovery in Germany, as in past recoveries. Domestic demand has typically trailed, leading to criticism from Germany’s trading partners. However, German consumers seem to be gaining confidence this time as unemployment falls sharply.

The German statistics office noted that compared with the last quarter of 2010, domestic consumption was up “markedly,” along with investment by businesses in machinery and equipment and construction.

“The growth of exports and imports continued, too,” it said. “However, the balance of exports and imports had a smaller share in the strong G.D.P. growth than domestic uses.”

The French statistics office noted that manufacturing production soared 3.7 percent in the first quarter, the strongest growth for at least 30 years. Household consumption was also up, but only slightly. Imports grew more rapidly than exports, weighing on the overall growth figure.

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