Germany and France powered economic growth in the euro area in the first quarter as booming exports fuelled domestic spending in the bloc’s core, offsetting turmoil sparked by sovereign debt woes in Greece, Ireland and Portugal.
German gross domestic product jumped 1.5 per cent from the fourth quarter and French GDP rose 1 per cent, exceeding economists’ median forecasts of 0.9 per cent and 0.6 per cent respectively. Growth in the 17-nation euro region accelerated to 0.8 per cent from 0.3 per cent, the European Union’s statistics office in Luxembourg said, twice the comparable US growth rate of 0.4 per cent and more than the median 0.6 per cent forecast in a Bloomberg News survey.
Expansion in the two largest economies using the euro is putting pressure on the European Central Bank (ECB) to keep raising interest rates even as the debt crisis afflicting peripheral countries worsens. Portugal’s economy contracted for a second quarter, indicating the country is in recession as the government cuts spending and raises taxes to narrow its budget deficit.
“The marked overall improvement in euro-zone growth in the first quarter masked major ongoing divergences in the performances of the individual economies,” said Howard Archer, chief European economist at IHS Global Insight in London.
The euro traded at $1.4307 at 12.05 pm in Frankfurt, up from $1.4229 before the German data were published. Hong Kong’s economy also surpassed expectations in the first quarter, expanding 2.8 per cent from the previous three months. Austria’s economy grew 1 per cent in the first quarter, Holland’s expanded 0.9 per cent and Spain’s notched 0.3 per cent growth. In Greece, GDP rose 0.8 per cent .