Germany grows, France stagnates ahead of Hollande-Merkel meeting

The German economy returned to growth in the first quarter of 2012, confounding expectations by posting a GDP rise of 0.5 per cent and avoiding a double-dip recession.

This follows a contraction in its economy of 0.2 per cent in the final quarter of 2011, its first dip since 2009.

Official data from German agency Destatis said the growth in the economy was due to a rise in domestic consumption and higher levels of exports.

But GDP figures from France were flat after a 0.1 per cent increase in economic activity in the final quarter of 2011.

The pronouncements on both Germany and the French economy come as the new French President Francois Hollande prepares to be sworn in to government and then heads off to meet German Chancellor Angela Merkel for vital talks.

Mr Hollande wants to advocate economic policies that stimulate growth. He believes growth rather than austerity will be more effective in reducing debt. Recent elections in Greece as well as France indicate that voters in Europe agree with him.

Jason Conibear, of foreign exchange specialists, Cambridge Mercantile, commented on today's GDP figures from France and Germany.

He said: “Austerity 1. Growth 0. That's the scorecard as Hollande meets Merkel following Tuesday morning's French and German GDP.

"In the Eurozone, what is widely perceived to be the least likely event is the one that is most likely to happen.

 "A Greece exit has gone from the impossible to the near certain in a matter of weeks.

 "The political narrative of Europe is proving as impossible to predict as the economic narrative. Markets don't like that.”

Overall, it looks likely that figures out later today across the eurozone will show that the region has fallen back into recession but figures released so far are slightly better than expected.

The Netherlands economy fell back by 0.2 per cent but this was better than expected.

In the final quarter of 2011, the eurozone as a whole contracted by 0.3 per cent and it is likely there will be a further contraction when first quarter figures come out plunging the eurozone back into recession.

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