Eurozone economy grows 0.2% in Q1

LONDON: The economy of the 16 countries that use the euro currency grew modestly during the first quarter of the year, despite a further big drop in output in debt-laden Greece. The economy grew by 0.2% in the first three months of the year compared to the previous quarter, EU statistics agency Eurostat said on Wednesday.

The modest rise follows zero growth in the fourth quarter of 2009 and highlights how slowly the world's second largest economy is emerging from recession as it struggles to contain a government debt crisis that has shaken confidence in the euro currency. The tepid recovery contrasts with that of the US, which saw output rise by a quarterly rate of 0.8% in the first quarter, according to Eurostat.

The eurozone economy still has a long way to go to make up for the output lost during the recession and the debt problems afflicting a number of economies isn't going to help matters in the months ahead. Governments will face pressure to cut spending and raise taxes to relieve their debt problems — which will remove government stimulus from the economy and could undermine growth further.

"Q1's modest rise confirms that the economic recovery in the region has failed to gain any real momentum even before the painful fiscal consolidation faced by many economies has begun," said Jennifer McKeown, senior European economist at Capital Economics.

Germany, the eurozone's biggest economy, saw output rise by 0.2%, while France, the second largest, grew by 0.1%. Italy returned to growth with a 0.5% quarterly rise. Most economists think that growth primarily came from the industrial sector as global trade perked up — separate figures from Eurostat showed that industrial production in the eurozone spiked by 1.3% in March from the previous month. AF