Fresh fears for UK economy as Germany and France power ahead

Labour calls for austerity programme to be eased as eurozone giants report rapid growth Fresh fears have been raised about the health of Britain’s moribund economy after the twin giants of the eurozone – Germany and France – posted rapid growth in the first three months of the year. Prompting fresh calls from Labour for an easing of the government’s austerity programme, figures showed that Germany, Europe’s biggest economy, expanded by 1.5% between January and March and has recovered all the ground lost in the global slump of 2008-9. France grew by an unexpectedly strong 1%. Ed Balls, the shadow chancellor, said the data was in sharp contrast to the UK, where the economy has gone sideways over the past six months and where national output is still 4% lower than before the recession. A weather-affected 0.5% drop in gross domestic product in the final three months of 2010 was followed by a similar bounce back in early 2011. Balls said the UK’s growth record was the third weakest in the European Union, with only Greece and Portugal – both in deep financial crisis – doing worse. “These figures expose how, since George Osborne’s spending review and VAT rise, Britain’s economy has gone from the fast lane to the slow lane,” Balls said. “As our economy has flatlined, countries like France, Belgium, the Netherlands and even Spain have overtaken us while Germany is powering ahead. “We’ve gone from the top end of the economic growth league table to being stuck at the bottom just above Greece and Portugal. These figures show the huge risks George Osborne is taking.” The Treasury said the government was being forced to tackle the problems inherited from Labour. “It’s good news that our biggest export markets are growing. It also underlines how much further into the danger zone the UK was 12 months ago. The government is having to deal with a deficit four times bigger than Germany’s,” a spokesman said. “Our housing bust was second only to Spain’s. But despite this, UK homeowners and small businesses are benefiting from the same low interest rates as in Germany and France. That’s because the world has confidence in the tough decisions the government is taking.” Analysts said that Germany, which is enjoying an investment boom as well as exporting heavily to China, was entering a new “wirtschaftswunder” – miracle economy – not seen in the decades after the second world war. Using one of Osborne’s favourite quotes, a Treasury source said: “Germany shows what you can do if you fix the roof while the sun is shining.” ING’s Carsten Brzeski, of ING, a Dutch banking, insurance and asset management group, said: “By now, even the last sceptics should have come to the conclusion that the German recovery is more than just a ‘statistical effect’. In fact, with its sound fundamentals, the economy is heading towards a second wirtschaftswunder.” Financial markets were also surprised by the performance of France, which has been less successful than Germany in seizing the export opportunities provided by fast-growing economies such as China. With some of the smaller monetary union nations such as Austria and the Netherlands also posting strong growth, the eurozone overall expanded by 0.8% in the first quarter of 2011. Howard Archer, chief economist at IHS Global Insight, said: “This is almost certainly as good as it gets for the eurozone and growth seems likely to moderate over the coming months. Nevertheless, there now looks a very decent chance that eurozone GDP growth will reach 2% in 2011 for the first time since 2007. “And the GDP growth rate of 0.8% quarter-on-quarter makes the UK’s 0.5% expansion look even more paltry.” Economic policy Europe Germany France Ed Balls Labour Economic growth (GDP) Economics Larry Elliott guardian.co.uk

Posted by on May 13, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.