Buoyant German exports, aided by a decline in the value of the euro, helped Europe’s largest economy record its fastest expansion since reunification in 1990, equivalent to an annualised rate of more than 8 per cent.
Both Germany and France also raised their growth estimates for the first quarter: up 0.3 points to 0.5 per cent for Germany, and 0.1 points to 0.2 per cent in the case of France.
But a sanguine headline figure in the eurozone concealed deep cracks within the 16-member currency bloc.
In contrast to Germany, the region’s so-called peripheral” economies – including Greece, Ireland, Spain and Portugal – struggled notably in the second quarter, which was defined by soaring sovereign debt yields in the wake of the Greek bail-out.
Preliminary figures on Thursday showed Greek GDP falling 1.5 per cent in the second quarter, the seventh consecutive period of contraction. Italy grew at 0.4 per cent, and Spain and Portugal at a mere 0.2 per cent.
As a result, Germany alone accounts for the bulk of the expected rise in growth across the entire region.
Nevertheless, GDP increased by 1.0% in both the euro area (EA16) and the EU27 during the second quarter of 2010,compared with the previous quarter. In the first quarter of 2010, growth rates were +0.2% in both zones.
Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 1.7% in both the euro area and the EU27 in the second quarter of 2010, after +0.6% and +0.5% respectively in the previous
That is also the point at which the bloc starts to create jobs, according to labour market experts. Unemployment in the eurozone has been stable at 10 per cent in the past few months and has yet to experience a meaningful decline.
The last two quarters have seen quarter-on-quarter growth well beneath that figure – even with Friday’s revisions – partly because unusually harsh weather in Germany hampered economic activity.
But few expect the heady rate of growth during the second quarter to be carried through to the end of the year.
With consumer confidence still relatively low in Europe, there has been little sign so far of a pick up in domestic demand, which economists are looking for as a signal of a sustained recovery. But appetite for consumption is likely to be curtailed by fiscal tightening measures being unveiled in most eurozone member states.