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Eurozone avoids return to recession
German growth helps eurozone avoid "double dip", but Greece sees economy shrink by 6.2 per cent in first quarter.
Last Modified: 16 May 2012 04:06
Greece's economy shrank 6.2 per cent in the first quarter while Germany performed better than expected [EPA]


The eurozone narrowly steered clear of recession in the first quarter of 2012, according to latest gross domestic product data, despite stagnant growth in many of the single currency bloc's economies and another sharp contraction in Greece.

Eurozone GDP stagnated in the first quarter registering zero per cent growth, the EU's statistics office Eurostat said on Tuesday, but that was slightly better than forecast by economists, who had expected a 0.2 per cent slump.

The data also showed a widening split between Germany, Europe's largest economy which registered 0.5 per cent growth, and weaker economies in the 17-nation single currency bloc.

Greece, whose economy has been in recession for a fifth year, shrank 6.2 per cent in the first quarter while France’s and Italy’s economies both stalled.

Estimated first quarter growth for eurozone nations where available

Of the euro's 17 members, seven are in recession: Ireland, Greece, Spain, Italy, Cyprus, the Netherlands, Portugal and Slovenia.

"With this morning's numbers, the German economy has not only avoided recession but could have even helped the entire eurozone economy falling into technical recession. 

"The German economy has escaped the technical recession many other eurozone countries are currently experiencing with no more than a fright," commented Carsten Brzeski, senior economist at ING bank.

Henning Meyer, a visiting fellow at the London School of Economics, told Al Jazeera: "Germany is still for the time being holding up against the trend."

He said given the country's economic structure of a "strong export-led growth model", the economy would pick up sooner rather than later.

"If this doesn’t happen, we’ll witness a decoupling of the German economy from the rest of the eurozone," Meyer said.

Barely out of the 2009 financial crisis, businesses and households in much of Europe are hampered anew as governments cut back on spending to curtail budget deficits and companies freeze plans to invest.

Despite two summits this year and another planned for next week, EU leaders have been unable to find a way back to growth, while many southern Europeans are turning against austerity measures, holding street protests in Madrid and backing anti-austerity political parties in Greece's recent elections.

Optimism in January that the eurozone would recover quickly in 2012 has been crushed by unexpected contractions in
manufacturing, consumer confidence and business morale, while one in 10 eurozone workers is out of a job.

"The eurozone economy... is not likely to recover any time soon," said Jurgen Michels, an economist at Citigroup in London.

Source:
Al Jazeera and agencies
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