France delivered its strongest economic growth in almost six years: 1,1 to 1,2 percent in the second quarter of this year. Germany showed an unexpected growth of 0,9 percent in the same quarter. Belgium, The Netherlands and Spain performed also strongly, but Italy reported slower economic growth.
The result is a gross domestic product (GDP) growth of 0,9 percent in both the Eurozone of 12 countries and in the 25 member states European Union, according to Eurostat, EU’s statistical department.
For the first time in many years the European figures topped those of the United States (growth of 0,6 percent) and Japan (0,2 percent). ‘Europe is in the lead’, economists concluded, but ‘the question now is how long the European recovery continues’. They expect that the EU could be hit by higher Eurozone interest rates, the negative effects of a stronger euro on exports, a slowing US economy and the planned increase of the German value added tax.
In the meantime the European Commission revised upwards the growth forecast for the third quarter of 2006, to 0,5 to 0,9 percent from 0,3 to 0,7 percent previously but it cut its fourth quarter forecast to 0,4 to 0,9 percent from 0,5 to 1,0 percent. It looks like the Eurozone has taken the rate increases by the European Central Bank (ECB) in its stride.
The French finance minister, Thierry Breton, made clear last week that he did not want to see the euro rising further against the dollar. He feared a loss of competitiveness if the interest rates in the Eurozone raise more than US rates, just now ‘the strategy of growth based on a return of confidence, control of public finances and increased investment, is bearing fruit’.
The recent economic figures put the Eurozone on course to grow by 2,5 percent this year; its best performance since 2000. Although the German economics minister Michael Gloss said, that the economic prospects for his country are ‘exceptionally positive’, economists expect a slowdown in 2007, largely as a result of a planned 3 percentage point increase of VAT in Germany, EU’s biggest economy.
