German GDP Could Prompt ECB to Act

The weak recovery in the 18-nation eurozone spluttered to a halt in the second quarter of 2014 as the “big three” of Germany, France and Italy all ran into fresh economic problems.

Data released in Brussels showing that the single currency area registered zero growth in the three months to June shocked financial markets and raised fears that the eurozone’s near five-year crisis is entering a new phase.

Analysts were particularly surprised by the 0.2% fall in German GDP, a fall caused by mounting problems for the export sector in Europe’s powerhouse economy.

Italy had already published its growth figures showing a 0.2% decline in the second quarter, while the French economy stagnated for the second successive quarter.

Some of the smaller economies on the periphery of the eurozone – including Spain and Portugal – recorded solid growth in the second quarter, and the Netherlands bounced back from a weak first quarter to expand by 0.5%. But Germany, France and Italy between them account for two-thirds of eurozone GDP and dragged down the overall growth figure. The annual rate of growth fell from 0.9% in the first quarter to 0.7% in the second quarter.

Markets had been expecting growth in the second quarter to be 0.1% or 0.2% and the weaker performance will add to pressure on the European Central Bank to consider fresh measures to boost eurozone activity and prevent deflation, including the introduction of a money-creating quantitative easing programme.

via The Guardian

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