Better Than Expected: German GDP Surges as Euro-Zone Split Widens

The German economy powered ahead in the first quarter with 0.5 percent GDP growth, far more than expected, while other countries in the euro zone stagnated or sank deeper into recession. The gap could could fuel calls for Chancellor Angela Merkel to soften her stance on austerity.

Mercedes cars waiting to be shipped for export at the German port of Bremerhaven. Zoom
REUTERS

Mercedes cars waiting to be shipped for export at the German port of Bremerhaven.

The German economy showed strong-than-expected growth in the first quarter, widening a gap with the rest of the euro zone that could fuel mounting calls for the continent to jettison austerity programs imposed by Chancellor Angela Merkel.

German GDP grew 0.5 percent in the first three months of 2012 from the final quarter of 2011. Economists had expected Europe's largest economy to show far weaker growth or even a contraction, which would have put Germany in recession, defined as two successive quarters of negative growth. German GDP shrank 0.2 percent in the final quarter of 2011.

Germany owes its quick comeback to surging exports and buoyant consumer spending. "According to preliminary calculations the exports -- unlike imports -- rose at the start of the year," the Federal Statistics Office said in a statement. Economists polled by Reuters had on average forecast growth of 0.1 percent.

By contrast, the French economy stagnated in the first quarter with zero growth, putting Europe's second largest economy close to recession.

The figures come ahead of the first meeting between Merkel and France's new Socialist president, François Hollande, who has called for a renegotiation of the fiscal pact on budget discipline to add measures that boost economic growth.

'Leading the Bloc'

International pressure is building on Merkel to relax her strict stance on austerity in return for aid to stricken countries, and the German opposition Social Democrats said on Tuesday they would only support a parliamentary vote on the fiscal pact if growth elements were added.

Data for the euro zone released on Tuesday showed zero growth in the 17-nation bloc in the first quarter, slightly beating forecasts for a 0.2 percent drop and thereby dodging a recession -- thanks to the surprise German growth.

"Germany is leading the bloc, but this doesn't mean we will have a strong rebound, austerity is not going away and southern European economies are really struggling," Mads Koefoed, a senior economist at Saxo Bank, told Reuters.

Italy's economy contracted 0.8 percent in the first quarter, the third consecutive quarterly decline and the steepest for three years, according to preliminary data that were weaker than expectations. The Dutch economy also shrank for a third consecutive quarter, shrinking 0.2 percent.

Data released two weeks ago showed Spain in recession. And Greece is in its fifth consecutive year of recession.

cro -- with wire reports

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