Eurozone Economy contracts in Q2 despite German resilience

BRUSSELS, Aug. 14 (Xinhua) -- Gross domestic product (GDP) fell by 0.2 percent in the euro area during the second quarter of 2012 on a quarterly basis, compared with zero growth in the first quarter, the statistical office of the European Union (EU) said Tuesday.

THE CORE STILL RESILIENT, MAYBE JUST FOR NOW

The single-currency area's largest economy Germany saw its GDP grow 0.3 percent in the second quarter, slower than the 0.5-percent increase in the first quarter but better than forecast, according to a statement of Eurostat.

The economic volume of France, the second largest economy in the eurozone, was unchanged in the quarter, the third consecutive quarter for the country's economy to stagnate, Eurostat figures showed.

"The German growth engine continues to rumble on," and "suggestions that Germany will succumb to recession as a result of its mis-handling of the crisis do not sit comfortably with its continued ability to produce positive GDP prints," Royal Bank of Scotland (RBS) European Economics said in an emailed statement.


"At the national level, there was a mixed bag," said the RBS statement, adding that, while the core countries performed better than expected, the periphery countries "dragged down significantly on euro area activity."

THE PERIPHERY STILL STRUGGLING

Italy's economy shrunk by 0.7 percent from April to June after a 0.8-percent quarter-on-quarter downfall in the first three months this year, while Spain, the eurozone's fourth largest economy, continued its downward trend seen in the previous two quarters to decrease by 0.4 percent.

The economic recession of Portugal, which is propped up by international bailout, deepened with GDP diving by 1.2 percent in the second quarter and Cyprus contracted by 0.8 percent.

The Eurostat figures also showed that the economy of heavily-indebted Greece further shrank by 6.2 percent in the second quarter compared with a year ago, after contracting 6.5 percent in the previous month.

The data indicated that even some economically stronger core northern countries are also at risk of being "infected." Finland, a close ally of Germany in advocating greater austerity in Europe, saw its economy shrink 1 percent on a quarterly basis in the second quarter.

Eurostat data showed that the GDP of the 27-nation EU also declined 0.2 percent in the second quarter, with Britain, the EU's second largest economy, registering a 0.7-percent decrease in its economy.