Europe dodged a bullet Tuesday after the economy of the 17 countries that use the euro narrowly avoided a recession in the first quarter of the year despite a raging debt crisis that's raising the specter of the breakup of the currency union. There was one reason why the eurozone avoided an overall recession - officially defined as two consecutive quarters of negative growth. Germany, Europe's biggest economy, was behind the better-than-expected performance as strong export figures helped it grow by 0.5 percent - equal to the US's economic performance. Germany, which makes up 30 percent of the bloc's economy, posted a GDP rise of 2.1 percent at an annualized rate, well above what economists had expected and more than reversing a slight drop in the fourth quarter. Growth was driven by exports, Germany's statistics office said, which offset weaker investment spending. “The global position of the Germany economy is helping it, and there's still demand from (fast-growing) parts of the world,” said Michael Heise, chief economist at insurer Allianz. He said first-quarter data suggest upside potential to his forecast of 1 percent GDP growth this year. Germany grew 3 percent or more in 2010 and 2011. “The euro area might have dodged recession, but it is firing on only one cylinder,” said James Ashley, senior European economist at RBC Capital Markets. Huge economic disparities exist across the single currency bloc. Of the euro's 17 members, seven are in recession: Ireland, Greece, Spain, Italy, Cyprus, the Netherlands, Portugal and Slovenia. Though Eurostat, the EU's statistics office, revealed that the eurozone posted flat output in the first quarter - against expectations that it might actually slip into recession with a 0.2 percent decline - there are growing concerns that the months ahead will be as difficult as any the currency union has faced since its creation in 1999. The political turmoil in Greece has ratcheted up fears of a disorderly debt default that could lead to the country's exit from the single currency and set off a chain reaction of contagion across the eurozone economy.
