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France and Germany move out of recession

Both France and Germany grew by 0.3% in the second quarter, much to the surprise of economic forecasters. This rebound followed a whole year of negative GDP. This compares with a fall in GDP of 0.3% in the US and a drop of 0.8% in the UK.

 

Given that GDP in Germany had fallen by 3.5% in the first quarter of 2009 and that of France had shrunk by 1.3% why have they both improved so quickly and why are they performing better than the UK.

 

Perhaps the main answer is that financial services are a major bastion of the UK economy and this has been the sector which has been at the centre of the credit crisis. By contrast, this sector is less important in both France and Germany as a percentage of economic output.

 

Germany has been particularly helped by a sharp rise in exports of 7% in the second quarter which is the fastest rate of growth for three years. Growth was also boosted by household and government expenditure. On top of this, imports have declined far more sharply than exports and thus had a positive effect on GDP growth.

 

In France, the economy minister, Christine Lagarde said that consumer spending and strong exports had helped pull France out of recession. In fact foreign trade contributed 0.9% to GDP in the quarter.

 

Within the EU Greece and Portugal also saw their economies grow by 0.3% but overall the Euro area saw a fall in GDP of 0.1% and the EU27 recorded a decline of 0.3%. This tiny fall in the Euro area compares sharply with a drop of 2.5% in the previous quarter.

 

The newly joined countries of eastern Europe continued to be hard hit, with Lithuania experiencing a 12.3% fall in the second quarter.  

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Posted in economic growth, European Union, eurozone, recession

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