Debt Crisis: Eurozone narrowly avoids falling into recession but Greek woes continue
THE eurozone has narrowly avoided falling back into recession, with the area’s economy showing 0pc growth in the first quarter.
The region's economic output went backwards in the last quarter of 2011, shrinking 0.3pc.
France’s economy did not grow in the first quarter of the year, raising concerns that the country could be headed towards a recession.
But there was better news in Germany, where the economy grew by a stronger-than-expected 0.5pc in the first three months of the year despite Europe's debt crisis.
French GDP was stagnant from January to March, the national statistics agency Insee said.
It also revised down growth in the fourth quarter of last year from 0.2pc to 0.1pc. Some analysts expect GDP to start contracting next quarter.
The news came on the same day that president-elect Francois Hollande takes office, vowing to restore France's growth by investing in infrastructure and small businesses. But he has also promised to rein in the deficit - a task made harder by stagnating growth.
Mr Hollande built his programme around an expectation of 0.5pc GDP growth for the year.
That is in line with the EU's forecast.
In Germany, exports helped the economy bounce back from a slight fall in output of 0.2pc in the fourth quarter of last year, the government statistics agency said.
Germany remains a standout performer despite Europe's troubles with too much debt in several countries. Unemployment is low and exports of manufactured goods such as cars and machinery remain robust. Compared with the same quarter a year ago, Germany grew 1.7pc.
The European Commission expects the economy in the 17 countries that use the euro to shrink 0.3pc this year.
Meanwhile, Greece could be forced to leave the euro if the country refuses to implement spending cuts agreed with the European Union, Angela Merkel warned.
The German chancellor said “solidarity for the euro” was threatened by the ongoing political crisis in Athens.
Stock markets around the world regained some ground today having fallen sharply with fears mounting that a euro break-up could lead to renewed financial turmoil.
Attempts to form a new government in Athens have failed the past nine days, although the country’s president will meet all major parties this afternoon to discuss the forming of a “technocratic” administration rather than a coalition.
“I believe it’s better for the Greeks to stay in the euro area, but that also requires that we set out a path on which Greece gets back on its feet step by step,” Mrs Merkel said.
“The solidarity for the euro will end only if Greece just says, 'We’re not keeping to the [austerity] agreement.’ But I don’t expect that to happen. I do think they are making an effort. There are many, many people in Greece who actually want it.”
Wolfgang Schaeuble, the German finance minister, added: “We have a very nervous situation in the eurozone.”