Growth in Spain but Eurozone stagnates

European economic growth stagnated in the second quarter as Germany and France report doing worse than expected, whilst Italy returns to recession.

The Eurozone as a whole saw a 0 per cent growth between April and June, when compared to an increase of 0.2 per cent in the previous three months.

Key factors in this abrupt stop in growth can be attributed to Germany’s -0.2 per cent fall together with Italy’s unexpected decline back into recession. With the brake firmly placed on France’s economic development, the three major economies in the Eurozone no longer appear to be propping up the rest.

Taking into consideration the recent tension between Brussels and Moscow over the developing crisis in the Ukraine, many economists feel that the figures provide enough cause for concern for the European Central Bank (ECB) to step in and introduce measures to boost growth and avoid deflation.

Speaking to the BBC, Nick Stamenkovic, at RIA Capital Markets in Edinburgh, said: “Disappointing euro area growth and intensifying disinflation pressures increase the pressure on the ECB for further action in coming months.

“If the economy disappoints in the second half then the pressure on the ECB to start money-printing in early 2015 will intensify.”

There is a silver lining, however, as both Spain and Portugal, two countries with a recognisably difficult path ahead of them, show positive signs.

Portugal has jumped from a 0.6 per cent contraction at the beginning of the year to a 0.6 per cent expansion in this quarter.

Spain, for its part, continues on the road to recovery, also reporting a 0.6 per cent rise in growth.

Avoiding deflation in the coming months may be the Eurozone’s biggest challenge, as consumer prices continue to fall across the continent. Annual inflation rates fell to 0.4 per cent in July, the lowest it has been since 2009. 

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