Germany Helps Eurozone Economy to Pick up Growth
14 February 2015, Nirapad News: The eurozone’s economy grew by a stronger-than-expected 0.3% in the last three months of 2014, helped by rapid growth in Germany. Germany’s economy – the largest in the eurozone – grew by 0.7% in the quarter, comfortably beating analysts’ forecasts.
However, France’s economy grew by just 0.1% in the same period. Figures from European statistics agency Eurostat showed the eurozone’s economy grew by 0.9% across 2014 as a whole.
While Germany’s economy shrank 0.1% in the third quarter of last year, strong domestic demand helped it to regain momentum in the fourth quarter, the Federal Statistical Office said. The economy grew by 1.6% during 2014.
“This is a thunderbolt,” said UniCredit economist Andreas Rees. “Some spoke of possible recession after the summer but instead Germany rebounded. The fact that the growth comes mainly from the domestic economy gives strong grounds for optimism,” he said. The strong data helped to lift European stock markets, and the German Dax index climbed above the 11,000 mark for the first time.
Berenberg Bank economist Christian Schulz suggested cheaper oil, a weaker euro exchange rate and government bond buying by the European Central Bank (ECB) should all help the German economy and “more than offset the serious short-term risks such as Greece and Russia”.
“While the first half of 2015 could still be a little more subdued due to these risks, we expect German growth to reach trend levels a bit above 2% in the summer 2015.”
Meanwhile, France’s anaemic fourth quarter growth meant the economy expanded by just 0.4% over 2014 as a whole. “It’s obviously still too weak, but the conditions are ripe to permit a cleaner start of activity in 2015,” said French Finance Minister Michel Sapin.
Of the 18 member states of the eurozone only three recorded a contraction in their economy: Greece, Finland and Cyprus. In the case of Greece the 0.2% contraction in the economy in the fourth quarter came after three consecutive quarters of growth. That disappointed analysts, who had been expecting the figures to show the economy growing again.
“This means that there is a high chance that Greece will slip back into recession, especially after the huge uncertainty brought about by the election and subsequent bail-out dispute, which is ongoing,” said Azad Zangana, senior European economist at Schroders.
Greece’s newly-elected government is currently trying to re-negotiate the conditions of its €240bn (£182bn) bailout from the eurozone, the European Central Bank and the International Monetary Fund, which it feels are punitive.
Key talks will take place on Monday. If there is no agreement soon, Greece will not be eligible for a much-needed loan under the current bailout deal and could run out of money.