Eurozone outpaces US growth in 2007

The EU's Eurostat data agency showed last year's Eurozone economic growth decreasing slightly to reach 2.7 percent, though easily outpacing US growth for the first time since 2001.


Eurozone economic growth eased only slightly last year to 2.7 percent, but still easily outpaced the US economy for the first time since 2001, according to a first official EU estimate on Thursday.

The rate, which was adjusted for seasonal variations, marked only a marginal slowdown from 2006 when the eurozone economy grew by 2.8 percent, figures from the European Union's Eurostat data agency showed.

The eurozone economy exceeded growth in the United States for the first time since the September 11, 2001 terror attacks as the US economy slowed to 2.2 percent in 2007.

Capital Economics analyst Jonathan Loynes said that the eurozone -- which counts 15 members since Cyprus and Malta joined in January -- would continue to shed its long-standing reputation as the laggard of the world economy.

"Growth will slow in 2008, but it should still be reasonably solid compared both to the eurozone's major competitors and to its own historical standards," he said.

Although the eurozone maintained a solid clip last year, the economy of the 27-nation EU grew even faster, chalking up growth of 2.9 percent after 3.0 percent in 2006.

However, a major housing downturn in the US economy and the turmoil it triggered in financial markets began taking its toll in Europe at the end of 2007, on top of record oil prices and a soaring euro.

As Belgian central bank governor Guy Quaden said earlier this week: "If Europe is less dependent on the US than in the past, we may not say that we're immune."

Eurostat said that the eurozone economy slowed to 0.4 percent in the final three months of 2007 and 2.3 percent over one year, in line with economists forecasts.

That was sharply lower than in the third quarter when the eurozone economy expanded 0.8 percent, and 2.7 percent over one year.

The decline was driven by a marked slowdown in Germany and France, the first and second-biggest economies in the eurozone, although the Dutch and Spanish economies proved more resilient than economists had expected.

German economic growth slowed to 0.3 percent in the fourth quarter, less than half the 0.7 percent pace in the previous three-month period while the French economy saw its growth fall to 0.3 percent from 0.8 percent.

"The slowdown in eurozone GDP growth in the fourth quarter provided a weak end to what was otherwise another year of strong expansion in the region," Loynes said at Capital Economics.

Economist Howard Archer at consultants Global Insight forecast that the eurozone economy would grow only 1.6 percent this year as it struggles in the face of growing headwinds.

"We expect the eurozone economy to experience a difficult year in the face of tighter credit conditions and financial market turmoil, slower global growth, a strong euro and elevated oil prices," he said.

The deteriorating outlook is beginning to worry the European Central Bank, which said on Thursday that "uncertainty about the prospects for economic growth is unusually high."

The ECB first acknowledged last week that the eurozone faced "unusually high" uncertainty, which economists interpreted as opening the door to possible interest rate cuts.

With inflation running at record levels over 3.0 percent in the eurozone, the ECB has so far been much more cautious than the US Federal Reserve to cut the cost of borrowing to avert a deep downturn.

Washington is also hoping that a vast economic stimulus package, loaded with tax rebates, will help the United States avoid a recession, while EU finance ministers remain mostly committed to improving their finances.

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