Euro zone growth pick-up fails to materialise

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Euro zone growth pick-up fails to materialise

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The euro zone economy ended last year with just stable growth. Gross domestic product in the 16 countries using the euro at the time grew0.3 percent from October to December, the same as in the third quarter, and GDP increased two percent year-on-year.

Growth did not accelerate – as had been expected – because expansion in the three largest nations fell short of forecasts and Greece and Portugal’s economies contracted.

The expected pick-up in growth did not occur as businesses ran down stocks in France, snow and cold hit construction in Germany and the Greek economy shrank sharply.

However German data and a small rise in February’s ZEW sentiment indicator suggested the country’s economic recovery remained on track and was likely to broaden out, though a government economic advisor said this year’s growth rate might well be lower than expected.

In France, the economy grew just 0.3 percent, half the forecast increase and the same level as in July-September, despite a rush to buy cars before a French scrappage subsidy scheme ended last year.

Italian growth was also lower than expected, at just 0.1 percent.

Data on Monday showed Portugal’s economy shrank 0.3 percent in the last quarter of 2010, reversing a third-quarter expansion.

Greece’s recession deepened, with contraction of 1.4 percent from the third quarter against expectations of a 1.2 percent decline. The country’s central bank said the economy would shrink for a third straight year in 2011 with gross domestic product dropping at least three percent.

Spain grew by 0.2 percent in the fourth quarter after stagnating in the previous three months.