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Germany leads euro zone to stronger growth
Published in The Saudi Gazette on 14 - 08 - 2010


Tags: BUSINESS CITYSCAPE)
BRUSSELS - The economy of the 16 countries that use the euro expanded by a better-than-expected 1 percent during the second quarter as growth engine Germany expanded at its fastest pace since reunification two decades ago.
Thursday's figures show the euro zone grew at its fastest rate in nearly four years - and faster than the US during the same quarter.
Germany posted its best growth since reunification on Friday, driving Europe past the United States in a four-year record but analysts warned of a recovery that may be peaking out.
Accelerating growth in Britain, France and even Spain initially nudged European stock markets higher but the early optimism faded as investors prepared for US data later in the day after a series of poor figures over recent weeks stoked fears of a double-dip recession.
With 2.2-percent growth between April and June, Germany was “playing in a league of its own,” according to Brussels-based ING economist Carsten Brzeski.
After suffering its worst post-war recession in 2009, “we are now experiencing XL growth,” Economy Minister Rainer Bruederle said, the best since 1990, when Germany was reunited after a 45-year Cold War division.
After managing just 0.2 percent in the first quarter, growth beat forecasts for 0.7 percent and outpaced that of the US, which posted a quarterly gain of 0.6 percent - down from 0.9 percent between January and March.
But while Amsterdam-based Nick Kounis of ABN AMRO said worries over a “double-dip” recession now center “on the other side of the Atlantic,” he admitted the overall picture could be “misleading.”
Spending cuts in almost all countries will make the road “bumpy” and “long,” he stressed, adding that “the deepening of Greece's recession is a timely reminder.”
Greece's economy shrank 1.5 percent in the second quarter after 0.8 percent in the first as savage cuts agreed with the EU and the International Monetary Fund in exchange for a massive bailout loan hit home.
On the upside, Britain posted a 1.l percent expansion and France - Europe's biggest economy after Germany - 0.6 percent, providing welcome relief after recession last year of 2.5 percent.
Paris now expects growth of 1.4 percent this year, although Oscar Bernal of ING in London also warned of a slowdown, citing one of the euro zone's largest fiscal deficits.
Spain, which only escaped recession in the first quarter, saw its economy grow by 0.2 percent, while the Netherlands and Austria each performed strongly with a 0.9 percent gain.
Euro zone's trade balance delivered a 2.4-billion-euro surplus in June.
That defied expectations from just a couple of months ago when Europe was threatened by a severe government debt crisis.
The US grew by 0.6 percent during the April to June period compared to the previous quarter.
The euro zone economy also beat market forecasts for a 0.7 percent rise and the muted 0.2 percent growth from the first quarter.
Governments across the region - particularly Greece, Spain, Ireland and Portugal - are slashing spending programs and raising taxes to cut their ballooning debt levels, depriving the economy of stimulus from government spending. Additionaly, the US, a major trading partner, is losing momentum.


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