Germany leads EU growth, France jumps, Italy lags

13th May 2011, Comments 0 comments

European economies posted solid first-quarter growth rates on Friday, with several showing strong demand at home, but Italy only scraped into growth.

Economists forecast that demand from abroad for European exporters could ease later in the year.

Germany, with the biggest European economy, led the way, expanding by a quarterly 1.5 percent to a level last seen before the economic crisis in 2008, provisional data showed.

France added 1.0 percent, the strongest rate since the second quarter of 2006, and Spain, a country said to hold the key to the eurozone debt crisis, turned in a gain of 0.3 percent as it picked up speed from the end of 2010.

But in Italy, the economy grew by just 0.1 percent in the first quarter, less than economists had forecast, a first official estimate showed. The outcome was the same as in the last quarter of last year.

The International Monetary Fund said on Thursday that core eurozone economies would benefit from sustained economic activity this year, with trading partners in eastern Europe set for even stronger growth.

Germany for example has established a solid network of industrial suppliers in the Czech Republic, Hungary and Poland that feed components up the economic ladder.

Gains in Germany and France "could raise hopes that the export-driven recovery in the euro-zone's core is broadening, perhaps to the benefit of exporters in the periphery," Capital Economics European economist Jonathan Loynes commented.

In France, Finance Minister Christine Lagarde said: "Private investment is up, consumption is durable and we expect a job creation of more than 50,000 in the first quarter."

She said: "Growth in the first quarter of 2011 came in at 1.0 percent, the strongest since the second quarter of 2006." She was "very confident that the forecast of 2.0-percent growth for 2011 can be met."

Among the smaller, healthy eurozone economies, Austria posted first quarter growth of 1.0 percent from the previous three-month period, fuelled largely by robust exports, data published on Friday showed.

In Romania, a struggling economy in eastern Europe, activity increased by 0.6 percent on a quarterly basis, confirming the country's exit from recession.

Romania had posted timid growth of 0.1 percent in the last quarter of 2010, ending two years of severe contraction in gross domestic product.

But while things are looking up in Bucharest, debt-laden economies in Greece and Portugal are expected to contract further this year, as exports struggle to take off and domestic spending is hit by austerity measures.

"There are still huge divergences within the eurozone and we suspect that growth even in the core will slow during the course of this year as the export boom fades and the fiscal squeeze takes hold," Loynes said.

Economic headwinds include rising inflation and interest rates fueled in large part by higher prices for oil and other commodities, and unrest in North Africa and the Middle East.

Europe's fragile banking sector could present another impediment to growth, as commercial banks still need to establish adequate capital buffers to guard against potential losses on eurozone government bonds and risky real-estate investments.

The Czech economy grew at a seasonally adjusted pace of 0.6 percent in the first quarter from output in the last three months of 2010.

The annual growth pace reached 2.5 percent in the first quarter, the Czech Statistical Office said in its flash estimate.

In Slovakia, the economy kept recovering at a modest pace in the first quarter of 2011, growing by a seasonally adjusted 1.0 percent against the last quarter of 2010.

And in Hungary, the economy continued to recover in the first three months of this year, notching up growth of 0.7 percent on a quarterly basis, official data showed on Friday.

On a 12-month basis, Hungary's gross domestic product expanded by 2.2 percent in the January-March period, double the rate of growth seen in the preceding quarter.

© 2011 AFP

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