German and French economies grow

Two of Europe's largest economies, Germany and France, have returned to strong growth in the first quarter of 2011, overshadowing the lacklustre performance of the UK.

Germany, Europe's powerhouse economy, grew by 1.5% after benefiting from the global recovery as emerging nations imported more of its manufactured goods such as machinery and cars.

Its growth was more than three times the 0.4% growth in the final of quarter of 2010 when, like the UK, it was hampered by snow-bound conditions.

Meanwhile, the French economy exceeded forecasts to grow by 1% in the first quarter thanks to higher consumer spending and corporate investment. In the previous quarter it had grown at just 0.3%.

French prime minister Francois Fillon said he was confident France would achieve its target of 2% growth this year.

The UK's economy, on the other hand, grew by just 0.5% in the first quarter of 2011 following a decline of 0.5% in the previous period, suggesting stagnation over the six months.

The UK is suffering from weak consumer confidence as wages fail to keep up with surging inflation and the Government makes swingeing cut-backs.

However, the strong growth of some of Europe's biggest economies could be good news for the UK by stimulating demand for exports.

The German growth was stronger than the 1% expected by analysts and means the economy has now made up the output it lost in the recession.

The year-on-year growth of more than 5% is the biggest since reunification two decades ago.

Carsten Brzeski, an analyst at ING Bank, described the German growth as impressive as the country looks set for a second successive year of GDP growth of more than 3%.

He said: "The German economy is on the way to prolonging its title of Europe's growth champion.

"The strong labour market, richly filled order books and simply the right export mix at the right time bode well for future growth."

The growth in France was nearly double the 0.6% forecast by the markets but there are doubts about whether its current pace can continue.

Describing the growth as stunning, Oscar Bernal, an analyst at ING, said: "These numbers are rather good news for France.

"All in all, we believe that the first-quarter GDP growth acceleration will only be temporary.

"We expect GDP growth to remain just below 2% this year, which would make it difficult for the government to bring the deficit down to 6% of GDP in 2011 and to 3% by 2013."

The combined economy of the 17 countries that use the euro grew by 0.8% in the first quarter, up from 0.3% in the previous three months, with Greece unexpectedly posting strong growth.

The market had expected a rise of 0.6% but the rate was pulled upwards by the acceleration of growth in Germany and France.

And Greece, which is struggling under the terms of a 110 billion euro (£96.7 billion) bail-out, posted growth of 0.8%, its first economic expansion for about three years.

Countries in the south of Europe generally put in a weaker performance than those in the north. Portugal's economy declined by 0.7%, Italy's grew by 0.1% and Spain saw growth of just 0.3%.

The euro was up at 0.88 against the pound as the stronger economic growth made it more likely that the European Central Bank would hike interest rates.

Howard Archer, chief economist at IHS Global Insight, said: "This is almost certainly as good as it gets for the eurozone and growth seems likely to moderate over the coming months in face of significant headwinds.

"Nevertheless, there now looks a very decent chance that eurozone GDP growth will reach 2% in 2011 for the first time since 2007.

"And it has to be said that the eurozone's first quarter GDP growth rate of 0.8% quarter-on-quarter makes the UK's 0.5% expansion look even more paltry."