Germany’s economy, the largest in the eurozone, contracted in the second quarter of this year, while France’s economy grew by 0.3%, the same rate as the eurozone’s combined economy during the same quarter, according to official data.
Germany’s economy unexpectedly contracted in the second quarter after avoiding recession at the start of the year, suggesting the euro zone’s largest economy has failed to take off despite easing inflation pressures.
Germany’s gross domestic product shrank by 0.1% in the second quarter compared to the previous quarter, preliminary data released by the Federal Statistics Office showed today.
Analysts had expected a revised 0.1% quarter-on-quarter increase after economic growth of 0.2% in the first quarter, according to Reuters.
On an annual basis, GDP in the second quarter contracted by 0.1% after adjusting for price and calendar factors.
The latest economic data comes a day after Germany’s Federal Statistical Office reported that Germany’s national debt rose to record levels over the past year.
Germany religion
In a related context, the statistics office said yesterday that public debt – the statistical measure of the debts of the federal government, state governments, municipal administrations and social insurance – rose last year by 3.3% to 2.44 trillion euros ($2.64 trillion).
At the same time, Germany’s per capita national debt rose by €778 ($842.89) to €28,943 ($31,357).
The Census Bureau report said the rise in national debt could be attributed to “increased debt at the federal and municipal levels, as well as Social Security, while state governments were able to reduce their debt.”
Another factor behind the rise in the national debt is the government’s subsidy of travel tickets to support public transport companies, a move that added about 9.8 billion euros ($10.61 billion) to the national debt.
At the same time, the federal government’s total debt reached 1.7 trillion euros ($1.83 trillion) at the end of last year, up 4.7% year-on-year.
The statistics office said the main reason behind the increase in federal government debt was the exceptional budgets used to reduce consumers’ energy bills, and the increase in military spending following the war in Ukraine in February 2022.
Additional spending on energy and defence subsidies has increased the national debt by €47.3 billion ($51.24 billion).
France
France’s economy grew by 0.3% in the second quarter of this year, the National Institute of Statistics announced on Tuesday.
Domestic demand contributed to growth to some extent, while household spending, a key driver of growth in the first quarter, remained flat in the three months to June.
The institute also revised its growth estimate for the first quarter to 0.3%, compared to the previously announced rate of 0.2%.
Euro-zone
In contrast, the eurozone economy as a whole grew by 0.3% in the second quarter despite weak German performance, according to official data on Tuesday, easing concerns about the region’s recovery.
The single currency area is performing better than it did in 2023, but economists remain concerned about the situation for the whole year despite the expected boost from France hosting the Olympic Games.
This comes after a similar growth in the first quarter of the year, as the eurozone turns the page on the recession witnessed in the second half of 2023.
The IMF expects the eurozone to grow by 0.9% in 2024, compared with 2.6% in the United States and 5% in China.
While better-than-expected growth may be encouraging for many, there are concerns about the position of Germany, Europe’s largest economic powerhouse, which is weighing on the single currency area’s performance.
But there are warning signs for the European economy after data last week showed that euro zone business activity slowed further in July as manufacturing remained weak.
“The eurozone economy is like the quality of the Seine, some days it looks okay but overall it’s bad enough to keep worrying about,” said Bert Collins of ING, referring to concerns about whether the French river is clean enough to host open-water swimming events during the Olympics.
The IMF expects the eurozone to grow by 0.9% in 2024, compared with 2.6% in the United States and 5% in China.
- Growth in Spain, which was considered among the best performers in the region, came in at 0.8%, Driven by exports and high household spending.
- Growth in France (Europe’s second-largest economy) grew by 0.3%, thanks to foreign trade and a recovery in business investment.
- I registered each of Italy Portugal grew by 0.2% and 0.1% respectively.
- Southern Europe performed better than other parts of the continent.
