Eurozone shows fragility

The eurozone economy, shaken by a debt crisis, made a weak start to 2010 as paltry first-quarter growth in Germany and France weighed on the 16-country currency area as a whole and Spain crawled out of recession.

　　While export-champion Germany stands to gain from a rebound in global trade, the weakness in the eurozone more broadly is likely to be compounded by austerity measures governments are preparing in a bid to prevent debts spiraling out of control, notably in Greece, Portugal and Spain.

　　After a flat last quarter of 2009, growth for the eurozone overall came in at 0.2 percent quarter-on-quarter in the January-March period, when activity was probably hit by unusually bad weather.

　　Germany's GDP grew 0.2 percent against the last quarter of 2009 to register a fourth straight quarter above zero. That was above forecast but lackluster next to the pace of post-recession recovery in the United States, not to mention the strength of China and other emerging market economies.

　　France, the eurozone's second-largest economy after Germany, reported a 0.1 percent GDP increase quarter-on-quarter for the January-March period, falling short of expectations, and growth in the fourth quarter of 2009 dropped to 0.5 percent from 0.6 percent.

　　"Germany and the eurozone are likely to continue lagging the global economy and what we're seeing in the United States," said Joerg Zeuner, an economist at VP bnk.

　　On a more positive note for Germany, if not the wider region, Commerzbank's Joerg Kraemer said Germany's export prowess left it well poised to outperform the rest on the back of an upturn in global trade.

　　Others expect a second-quarter rebound as countries recoup the losses caused by harsh winter conditions at the year-start, but remain cautious beyond that, given moves to shrink national deficits through spending cuts and tax hikes.

　　"Unfortunately, the outlook beyond the spring sprint is less rosy. Even if there are past examples of expansionary fiscal consolidation, austerity programs in several eurozone countries will weigh on growth in the coming years," said Carsten Brzeski, an economist at ING financial Markets.

　　Greece, where the euro-weakening debt crisis of recent weeks erupted, reported a 0.8 percent GDP drop for the first quarter, which, while bad, was much less severe than the 1.4 percent drop forecasters had flagged for a country which is now reliant on outside aid.

　　Spain, which accounts for more than 10 percent of total eurozone GDP, reported 0.1 percent growth - finally exiting recession after nearly two years of contraction.

　　The Portuguese economy expanded 1 percent in the first quarter after a slide of 0.3 percent in the final three months of 2009, while Italy reported a 0.5 percent rise in GDP for the January-March quarter.

Source: Global Times