Eurozone economy stalls on shock setback in Germany

14th August 2014, Comments 0 comments

Eurozone growth ground to a standstill in the second quarter, official data showed on Thursday, dragged lower by Germany and France, the currency bloc's biggest economies.

Eurostat said the 18-nation eurozone turned in zero growth in the three months to June.

That fell short of analysts' forecasts for 0.2-percent expansion, with growth across the 28-nation European Union up only 0.2 percent.

The data is bad news for the overall outlook for the world economy as well, since the eurozone is an important component of global activity and trade.

The unexpectedly low growth figure was mainly the result of a surprise 0.2-percent shrinkage in Germany, usually the reliable eurozone growth engine, and stagnation in an already fragile French economy.

But Italy, which has already reported contraction of 0.2 percent, also added to problems in the eurozone, while Spain disappointed with growth of 0.6 percent.

Analysts expected that growth would accelerate later in the year, but with geopolitical tensions in Ukraine enduring, worries are now that a fragile recovery in the eurozone may be in danger.

"It now looks very likely that GDP (gross domestic product) growth for the whole of 2014 will remain below 1.0 percent," said analyst Peter Vanden Houte of ING Bank.

France downgraded its outlook for the year by half on Thursday, to 0.5 percent instead of 1.0 percent.

The strongest quarterly growth across the EU occurred mainly in the east, with Latvia showing growth of a full percentage point and Hungary growing by 0.8 percent.

Britain, outside the eurozone where the central bank has enacted years of highly accommodative monetary policy, also expanded by 0.8 percent over the quarter.

© 2014 AFP

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