Eurozone’s economic growth grinds to halt

BRUSSELS - Reuters

Official data has shown that Germany’s growth shrank in the second quarter, dealing a blow to the eurozone’s biggest economy.

Eurozone’s economy unexpectedly stalled in the second quarter of the year dragged down by shrinking growth in Germany and stagnant France, ringing alarm bells about the health of the bloc’s economy bracing for impact of sanctions against Russia.

Economy of the 18 countries sharing showed no growth in the three months to June when compared with the first quarter when it was up 0.2 percent, data from the EU’s statistics office Eurostat showed Aug. 14.

Analysts polled by Reuters expected the 9.6 trillion euro economy to squeeze out a 0.1 percent quarterly expansion.

The worse-than-expected performance of one of the world’s biggest economies is a warning ahead of the incoming quarter when European Union will feel hard impacts of sanction against Russia imposed in July over its involvement in Ukraine crisis.

When compared with the same period last year the eurozone’s gross domestic product (GDP) grew as expected by 0.7 percent after a 0.9 percent rise at the beginning of the year.

Top two disappoint

Germany’s economy shrank in the second quarter and France again failed to conjure up any growth, snuffing out any signs of a recovery in the euro zone which is now also weighed down by tit-for-tat sanctions with Russia.

Europe’s largest economy contracted by 0.2 percent on the quarter, undercutting Bundesbank forecasts that it would stagnate, with foreign trade and investment notable weak spots, the German Statistics Office said yesterday.

With so much uncertainty surrounding Russia and Ukraine, a quick rebound is unlikely.France fared little better, flatlining for the second successive quarter.That forced the French government to confront reality, saying it would miss its budget deficit target again this year and cutting its 2014 forecast for 1 percent growth in half.

On top of disappointing data from the bloc’s two largest economies, the third largest Italy fell back into a technical recession in the second quarter in a sign Europe struggles to get the economy back on foots as reforms lag behind.

Positive news came from Spain where growth accelerated to 0.6 percent quarter-on-quarter in the three months to June, while the Netherlands bounced back to a quarterly growth of 0.5 percent after a 0.4 percent fall in the first quarter.

In a separate data release the Eurostat confirmed eurozone inflation fell in July to its lowest level since the height of the financial crisis nearly five years ago, keeping the European Central Bank vigilant about risks of a deflation. Consumer prices o rose by just 0.4 percent on the year in July, the weakest annual rise since October 2009 when prices fell by 0.1 percent.