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Europe's economy stalls

Frankfurt - Europe's economic recovery has stalled, new data out on Friday showed, with the heavyweight German economy slowing to a halt in the fourth quarter of 2009 and Italy switching back to contraction.

Elsewhere in Europe, growth slowed to 0.3% in the Netherlands and to 0.4% in Austria but the recovery sped up in France, where growth was at 0.6% for the fourth quarter compared to 0.3% in the third.

There was a mixed picture in Central and Eastern Europe too. The Czech Republic fell back into contraction following two quarters of growth, while Hungary's prospects were brighter as the contraction slowed to 0.4%.

Europe in general has begun to emerge from what is in most cases record recessions, but the recovery process is expected to be slow and bumpy because business investment and consumer consumption are still weak in many cases.

Full year figures showed that Germany, the biggest European economy, contracted by 5.0% in 2009, France by 2.2%, the Netherlands by 4.0%, Austria by 3.6% and the Czech Republic by 4.3%.

The latest German data showed that "the recovery of the German economy lost momentum at the end of 2009," the Destatis office said in a statement.

The German economy is heavily dependent on exports and once again they made the only positive contribution in the final three months of the year, since consumption and business investment were both down, Destatis said.

On Tuesday, the International Monetary Fund nonetheless forecast German growth of 1.5% this year, slightly higher than the government's forecast of 1.4%.

"Today's numbers are a setback but no disillusion," ING senior economist Carsten Brzeski stressed in reference to the German figures.

"The eurozone growth engine has taken a break in the fourth quarter but it should return soon," he added, while noting that the numbers were "a good reminder that recoveries can not only be bumpy but also capricious."

UniCredit economist Andreas Rees said that "the situation of the German economy is fundamentally far better than it looks like from a statistical viewpoint."

But "with the recent return of risk aversion in financial markets, doubts about the strength of the recovery have again emerged." Brzeski warned.

- AFP

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