After four consecutive months of contraction, both the French and German economies grew by an unexpected 0.3% in the second quarter, raising hopes of an early exit from the recession in Europe.
France and Germany’s financial sector awoke to good news on Thursday morning, with both countries announcing surprising GDP (gross domestic product) growth of 0.3% for the second quarter of 2009.
GDP is the most important national economic growth indicator.
The news came as a shock, given that economists had predicted a further contraction in both France and Germany after four consecutive quarters of negative growth. Furthermore, their performance for the first quarter of 2009 had been abysmal: France’s GDP had fallen by 1.3%, while Germany’s had slumped by 3.5%
Some experts are teeming with optimism. Andreas Rees at Unicredit (a multinational European investment group) told Reuters, “The recession has ended, and it has ended sooner than we thought.”
Owen Fairclough, FRANCE 24’s business correspondent, cautions against excessive expectations. The success of France and Germany “was not mirrored everywhere,” he pointed out. Indeed, the GDP for the Eurozone dropped 0.1% overall in the second quarter.
Fairclough says the reason France and Germany fared better than their neighbours is down to three words: “spend, spend, spend. France had tax incentives to increase consumer spending and consumer confidence.”
France’s finance and economy minister, Christine Lagarde, expressed her delight in an interview with RTL radio. "France is finally coming out of the red," she said. “These are obviously very positive numbers, which have surprised us and made us quite happy.”
The figures are surprising as the French national statistics office INSEE had been forecasting a 0.6% drop and the Bank de France, the country’s central bank, had tabled on a 0.4% contraction for the quarter.
For Germany, Thursday’s news marked the end of the country’s deepest recession since the Second World War.
Germany’s federal statistics office said Thursday that the rise was due to increases in private and public consumption, as well as construction.
However, Fairclough cautions that the rebound may be fragile. “[France and Germany] have to be careful,” he said. “The ECB has continually lowered interest rates. There’s not much room for manoeuvre now.”
Date created : 2009-08-13