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c.2013 New York Times News Service

PARIS — Bolstered by stronger consumption and investment in Germany as well as growth in France, Europe broke out of recession in the second quarter, ending its longest postwar contraction, official data showed Wednesday. But the weak upturn, high unemployment and other problems on the Continent left open the question of whether the nascent recovery can last.

The two biggest economies in the 17-nation eurozone each helped pull the region as a whole out of its doldrums, with Germany posting 2.8 percent annualized growth in the second quarter and France 2.0 percent. Overall, gross domestic product in the zone grew 1.2 percent, according to Eurostat, the official statistics office of the European Union. The second quarter’s growth slightly exceeded the 0.8 percent growth forecast by economists.

The eurozone’s growth fell short of the 1.7 percent second-quarter showing by the United States and 2.6 percent in Japan.

But even modest growth is a relief in a region where unemployment has risen to 12.1 percent and there are still fears of a new debt crisis and existential questions about the euro.

The meager growth rate will not make a serious dent in the problems of the 26 million people Eurostat says cannot find work, said Ralph Solveen, an economist at Commerzbank in Frankfurt, Germany.

“I wouldn’t look for a significant reduction in unemployment in the next year,” he said. “At best, we can hope for a stabilization of the job market.”

The fact that households in Germany and France helped to drive the rebound “suggests that the recent period of relative calmness in the eurozone is encouraging core consumers to spend money and might raise hopes of a narrowing of the economic imbalances within the currency union,” said Jonathan Loynes, an economist in London with Capital Economics.

A surprisingly strong showing came from Portugal, where the economy grew 4.4 percent in the second quarter, the highest rate in the 28-nation European Union. The return to growth after two years of deep recession was hailed by the center-right government in Lisbon as proof that austerity policies, imposed in return for a bailout of 78 billion euros ($104 billion) negotiated in May 2011, were finally bearing fruit.

Besides Portugal, there were signs of life elsewhere in the battered “periphery” of the eurozone. Spain’s economy shrank by 0.4 percent, improving on a 2.0 percent slide in the first quarter.

The economy of Cyprus, still reeling from the collapse of its banks and the troika’s remedy, shrank 5.6 percent at an annualized rate, the worst showing of any union member but a modest improvement from its 6.8 percent first-quarter decline. Even the hapless Greek economy, which has suffered 20 consecutive quarters of decline, got a small glimmer of hope with signs that the pace of contraction is slowing.

Economists say that cleaning up bad loans at Europe’s banks and getting them to lend again would help the economy gain firmer footing. Politicians are not expected to act until after Germany’s elections. The European Central Bank said last month that it would seek to encourage lending to Southern Europe by making it easier for banks to use certain securities as collateral.

Still, Loynes wrote, the weaker European economies “remain a very long way from the rates of expansion required to address their deep-seated problems of mass unemployment and cripplingly high debt.”

“The recession may be over,” he added, “but the debt crisis is decidedly not.’”

In the August vacation season, with much of Europe preparing for a long holiday weekend, politicians were generally muted in their reaction to the GDP report. Officials said that there was no reason for complacency, but added that they saw some chance at longer-term growth.

Chancellor Angela Merkel of Germany, who is seeking a third term in Sept. 22 elections, had no immediate comment. But her economics minister, Philipp Rösler, wasted no time in proclaiming that “there is every reason for people in Germany to look optimistically into the future.” Merkel has been the main proponent of structural reform in the weaker economies of Southern Europe. But neither economists nor politicians used Wednesday’s figures to proclaim a victory for pro- or anti-austerity camps.


“It’s a very good sign that we are not declining into a longer recession,” said Jürgen Matthes, senior economist at the Cologne Institute for Economic Research. But, he added, “We can only really say what is successful when the numbers prove it.”

As for an election benefit for Merkel, he noted: “ ‘It’s the economy, stupid’ holds true everywhere. These numbers are not a decisive factor — but they help.”

Germany’s federal statistics office and several analysts attributed the boom in Germany to stronger consumption, investment and activity in the construction industry after a severe winter. From January through the end of March, the eurozone economy overall contracted 1.2 percent, according to Eurostat.

Investor reaction to the GDP figures was understated in Europe, where stocks and the euro barely budged.

The expansion of the region’s economy had been foreshadowed by recent indicators showing that factories have been increasing output and consumers and businesses were gaining confidence.

“You can see that things have gotten better in Europe because foreigners are coming and spending more money,” said Irene Sassi, an assistant in a souvenir store in downtown Siena, Italy. “But Italians are still coming in smaller numbers than they used to, and they buy food and drinks, not contrada flags or scarves. In our pockets, the situation has not improved recently, that I can tell you.”


France, whose economy declined in the two previous quarters, saw household spending grow and companies increase exports of goods and services, though investment declined slightly.

The French government was quick to welcome the news and to take credit for the stronger-than-expected growth, which came after several less optimistic economic assessments from both the International Monetary Fund and Insee, the French statistics agency.

President François Hollande refrained from making a statement, but both his finance minister, Pierre Moscovici, and his prime minister, Jean-Marc Ayrault, were quick to interpret the growth in GDP as an endorsement of the government’s strategy to bring down the deficit, which was 4.8 percent of GDP last year, to meet the European Union target of 3 percent. The strategy has included raising taxes and a labor deal aimed at encouraging employment.

Moscovici said in a statement that the growth “results at once from an improvement in the European economic context and from a firming up of interior demand.”


Moscovici, who just days ago predicted that there would be no growth this year, sounded pleasantly surprised, noting that the volume of French exports had increased 2 percent and that consumer spending rose 0.4 percent. Opposition politicians said they were pleased to see growth, but warned against reading too much into the number. “I see this number as a technical correction that does not erase the general sluggishness of the French economy,” said Luc Chatel, a member of the French Parliament and a former government minister from the center-right Union for a Popular Movement party.

Economists were more cautious, arguing that structural changes are needed in France for a lasting economic turnaround. The government is considering changes in the pension program as well as other measures to encourage job creation, but has not yet taken the steps needed to enact them, they said.

“We don’t know if this kind of recovery from quarter to quarter will last,” said Jean-Paul Fitoussi, an economics professor at the Institute of Political Studies at the Sorbonne, adding that since he had seen no new “engine of growth’” the improvement was surprising.

“I don’t yet see any strong policies at work to get out of the present situation,” he said.