Eurozone economy grows 0.8% in the first quarter

Eurozone economy grows 0.8% in the first quarter

Domestic demand was a key driver of German growth
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The economy of the 17 countries that use the euro grew by 0.8% in the first three months of 2011, figures show.

Germany’s economy grew by a faster-than-expected 1.5%, and there was a surprisingly strong 0.8% growth from debt-laden Greece.

France and Austria both announced growth of 1%, but Italy and Spain lagged behind, with growth of 0.1% and 0.3% respectively.

Portugal contracted by 0.7% following a 0.6% decline at the end of 2010.

Italy’s growth figure was worse than expected, with the 0.1% rate the same as it was for the last three months of 2010.

Last month, the Italian government cut its growth forecast for the whole of 2011 from 1.3% to 1.1%.

The rise in Spain’s growth rate to 0.3% from

0.2% in the previous quarter is more encouraging as the country tries to avoid a third consecutive year of contracting GDP.

It is struggling to deal with an unemployment rate of 21.29%, which is the highest in the industrialised world, as it attempts to recover from the financial crisis and a property slump.

‘Very confident’

Figures earlier in the week showed that German exports and imports had both risen to their highest monthly level since records began in 1950.

Germany’s GDP figures from Destatis showed that domestic demand had been one of the strongest drivers of growth.

The country’s growth figures were “fantastic”, according to Christian Schulz at Berenberg Bank.

“Consumption will become more and more the engine of growth in the future, since unemployment is dropping starkly,” he said.

“France also expanded robustly. The eurozone core remains the anchor for the entire currency union.”

France’s growth rate was its fastest since the second quarter of 2006.

France’s economy minister Christine Lagarde said she was now “very confident that the (government) forecast of 2% growth for 2011 can be met”.

She added that the manufacturing sector had been a particularly strong driver of growth in France.

Eurozone economy grows 0.8% in the first quarter