Euro zone GDP growth makes ECB rate rise more likely

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Euro zone GDP growth makes ECB rate rise more likely

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The euro zone economy rebounded in the first three months of this year according to the latest estimates from the EU’s Eurostat agency.

Growth accelerating to 0.6% from 0.3% in the last quarter of 2005.

Compared with the same period a year ago the region saw growth rise to two per cent in the first quarter.

That compared with annual growth of 2.2% for the 25 countries of the European Union and 3.5% for the United States.

The fastest growing economies were Lithuania at 7.4%, Greece – where it was 4% – and Spain with 3.5%.

Financial analysts said the figures pointed to a continuing recovery.

But among the larger economies they were rather mixed.

There was good news about Italy’s GDP.

It was up 0.6% in the first three months after failing to grow at all in the previous quarter.

The German economy, Europe’s largest, proved disappointing.

The Federal Statistics Office said it grew by just 0.4% from the fourth quarter of last year when it stagnated.

The figures make it more probable that the
European Central Bank will soon raise interest rates to head off inflation.

ECB President Jean-Claude Trichet reacted to the news by saying that it confirmed his view that euro zone economic growth was now closer to where it should be.