The Eurozone economy narrowly avoided a recession in the first quarter, as robust German economic growth offset contractions by the Spanish and Italian economy.
Gross domestic product for the 17-nation bloc remained flat compared to the previous quarter after shrinking 0.3 percent in the fourth quarter of 2011, flash estimate from Eurostat showed Tuesday. Economists were forecasting a 0.2 percent contraction for the first quarter.
The first quarter stagnation helped the bloc to avoid recession as two consecutive quarters of contraction indicates technical recession.
Nonetheless, over reliance on German growth, the deepening recession in peripheral economies coupled with austerity measures are weighing on future prospects for the region.
On a yearly basis, the seasonally adjusted GDP stagnated following a 0.7 percent expansion a quarter ago. The consensus forecast called for a 0.2 percent fall.
The EU27 first quarter economic performance remained flat with the previous quarter's and expanded 0.1 percent on a yearly basis. Data revealed widening divergence between Germany and peripheral economies.
Recovering from a contraction, German GDP grew by a more-than-expected 0.5 percent in the first quarter. At the same time, the French economy logged no change after rising 0.1 percent in the previous quarter.
Spain, which is struggling to strengthen its banking system and mammoth fiscal deficit, has slipped into a recession in the first quarter. Italy had already entered a recession in the fourth quarter of 2011. The Spanish and Italian GDP fell by 0.3 percent and 0.8 percent, respectively.
Estonia and Slovakia expanded 0.5 percent and 0.8 percent, respectively. Peripheral economies that received bailout funds, namely Greece, Portugal and Ireland were already in recession in 2011.
Further escalation of the debt crisis, let alone a Greek euro exit, could well derail the envisaged recovery, ING Bank NV's economist Martin van Vliet said.
Elsewhere, Jennifer McKeown an economist at Capital Economics said, with economic weakness hindering consolidation efforts and causing more public unrest, the danger of a euro-zone break-up is as great as ever.
According to European Central Bank's Survey of Professional Forecasters, the 17-nation bloc will shrink 0.2 percent this year. The European Commission projects a 0.3 percent contraction this year.
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