Eurozone economy stalls on German setback

The 18-member eurozone turned in zero growth in the three months to June, Eurostat says.

Eurozone growth ground to a standstill in the second quarter, official data shows, dragged lower by Germany and France, the currency bloc's biggest economies.

Eurostat said the 18-member eurozone turned in zero growth in the three months to June.

That fell short of analysts' forecasts for 0.2-per cent expansion, with growth across the 28-member European Union up only 0.2 per cent.

The data is bad news for the overall outlook for the world economy as well, since the eurozone is an important component of global activity and trade.

The unexpectedly low growth figure was mainly the result of a surprise 0.2-per cent shrinkage in Germany, usually the reliable eurozone growth engine, and stagnation in an already fragile French economy.

But Italy, which has already reported contraction of 0.2 per cent, also added to problems in the eurozone, while Spain disappointed with growth of 0.6 per cent.

Analysts expected that growth would accelerate later in the year, but with geopolitical tensions in Ukraine enduring, worries are now that a fragile recovery in the eurozone may be in danger.

"It now looks very likely that GDP (gross domestic product) growth for the whole of 2014 will remain below 1.0 per cent," said analyst Peter Vanden Houte of ING Bank.

France downgraded its outlook for the year by half on Thursday, to 0.5 per cent instead of 1.0 per cent.

The strongest quarterly growth across the EU occurred mainly in the east, with Latvia showing growth of a full percentage point and Hungary growing by 0.8 per cent.

Britain, outside the eurozone where the central bank has enacted years of highly accommodative monetary policy, also expanded by 0.8 per cent over the quarter.


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