Business

Growth slows in Europe's leading economies

Siemens factory
Image caption Economic recovery has been reflected in positive figures from industrial giant Siemens

The pace of economic recovery has slowed in Europe's major economies, according to official estimates.

Germany, Europe's largest economy, has seen a sharp slowdown in the third quarter, with growth of 0.7% compared with the record expansion of 2.3% it reported in the previous three months.

In France, GDP grew by 0.4% between July and September, compared with growth of 0.7% in the previous quarter.

The 16 eurozone members grew 0.4% on average, down from 1% growth before.

Italy also saw its rate of recovery decline, to 0.2% from 0.5% in the second quarter.

But in crisis-hit Greece, the economy contracted at a slower rate of -1.1%, compared with -1.7%.

Last month, figures revealed that the UK economy had grown by 0.8% in the third quarter.

'Solid growth'

Germany's growth rate in the second quarter - now revised from 2.2% to 2.3% - was the fastest since the country reunified.

Announcing its first estimate of third-quarter growth, the German statistics office Destatis said the upturn was continuing.

But it said the slower pace had been expected, given the record result in the second quarter.

Demand for its goods is crucial to the world's second largest exporter, and Destatis said both domestic and foreign demand had made a positive contribution to growth.

It said the reasons for expansion were wide-ranging, with household and government expenditure, demand for machinery and equipment, as well as imports and exports all contributing.

Higher foreign demand for German-made machinery could indicate that companies overseas are investing for future growth.

But Capital Economics said that although it was expecting Germany to continue to outperform other European economies, it thought that the eurozone's recovery would "grind to a halt" next year.

New investment

France's finance minister Christine Lagarde said that the recovery there was looking "solid" and pointed out that household spending in particular had picked up.

"Companies are starting to invest. The acceleration in household spending reflects the favourable effects of the labour market's stabilisation," she said in statement.

France is facing a record budget deficit of 7.7% of GDP this year.

It has announced government spending cuts and the end of some tax breaks to try to bring it down.

But economists have warned that these measures could cause growth to slow further next year.

"There is no major deceleration compared with where we were in the spring, but we have not yet tested French domestic spending for the impact of fiscal consolidation, which is starting in January," said Deutsche Bank economist Gilles Moec.

The government is forecasting economic growth of 2% for 2011, which would also help mend its finances. But this is higher than many economists are forecasting.

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