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German economic expansion stalls as debt crisis weighs

Publish Date23/08/2012 07:03:01 AM

Last Update23/08/2012 07:20:08 AM

German economic expansion stalls as debt crisis weighs

German`s economy expanded at 0.3 percent rate in the second quarter, slowing from the prior revised rate of 0.5 percent, but underscoring that Europe`s largest economy is still beating it`s euro area neighbors as Europe`s sovereign debt crisis continue to hammer European economies.

German economic expansion matched analysts` median estimate today, as the Federal Statistics Office Wiesbaden today reported a second reading of an unrevised growth at an annually adjusted rate o 1.0 percent and unadjusted rate of 0.5 percent expansion from year ago.  

We can Cleary see that the European debt crisis continue to cast its gloomy shadows on the global economy and euro area in particular, together with the unpopular austerity measures that is aimed at helping other debt-throttled euro members, given that Germany provides the biggest part of aid.

Expansion, however, was backed by the country`s trade, with exports rising 2.5 percent following a revised rise of 1.2 percent a quarter ago, while imports rose 2.1 percent after revised drop of 0.2 percent. Exports gains were overshadowed as capital investment and construction spending fell.

Growth was beaten as capital investment fell 0.9 percent in the quarter, slashing 0.2 percentage point from the GDP. Furthermore, spending on plant and machinery was down 2.3 percent and construction investment contracted 0.3 percent, while domestic demand shaved 0.1 percentage point from growth.

Germany is under mounting pressures after the 17-nation euro economy contracted at 0.2 percent rate in the second quarter, as euro area demand which is Germany`s biggest exports market is remains intolerably weak, pressing the business climate and confidence that slid for the third month in July.

Unemployment is at a two-decade low and German companies are barely supported from ailing business demand in the euro area, weighing on the overall investment sentiment, where policy makers continue to struggle in order to revive growth amid constant failures due to mounting European problems.

On the debt crisis front, a bunch of European meetings is around the clock tomorrow and day where Greek finance minister meets German Chancellor Angela Merkel in Berlin tomorrow, then he will fly to Paris to meet President Francois Hollande the day after.

Eurogroup chief yesterday said that an extension of the Greek adjustment period of the its bailout terms would depends on the review of the Troika; a trio of European Commission, the International Monetary Fund and European Central Bank, for Greece`s state of economy.

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