The eurozone economy surprised to the upside in the last three months of 2014, posting quarter-on-quarter growth of 0.3 per cent, the European Union’s statistical office, Eurostat, said Friday.

eurozone
eurozone

 

Analysts had predicted a smaller uptick of 0.2 per cent – the same growth rate registered in the third quarter. After the positive surprise, they remained cautious on whether the European currency bloc had finally stopped stagnating.

Marco Valli of Italy’s UniCredit bank noted that Germany’s “whopping” 0.7-per-cent quarter-on-quarter growth w

s responsible “for virtually all the positive surprise in the eurozone number,” whereas “France and Italy remain in low gear.”

French output grew by a meagre 0.1 per cent, while in Italy – where the economy has not grown for more than three years – there was a flat GDP reading. Spain impressed with a 0.7-per-cent jump, while Greece was the black sheep with a 0.2-per-cent contraction.

For crisis-stricken Athens, it was the first setback after three consecutive quarters of economic growth. It came as the leftist government of Prime Minister Alexis Tsipras was engaged in fraught talks over the softening of the country’s bailout terms.

Clemente De Luca, an analyst at France’s BNP Paribas bank, said the eurozone recovery was set “to gather some pace over the coming quarters” thanks to lower global oil prices, a depreciating euro and stimulus action from the European Central Bank (ECB).

However, De Luca listed four factors which may weigh on the outlook: a new rise of oil prices, renewed geopolitical tensions in areas like Ukraine or the Middle East, faltering national economic reform efforts and renewed tensions on Greece.

“It remains quite difficult to gauge what might be the consequences […] were the Greek banking sector to be cut off from any source of liquidity from the ECB and Greece were forced to leave the [euro]zone. Yet, this seems a very catastrophic scenario,” he noted.

Jennifer McKeown of Capital Economics, a British-based research outfit, said the eurozone economy was set to enjoy “pretty modest growth” in the current quarter and expand over the whole of 2015 by only 1 per cent.

“This will do little to ease the threat of deflation and there is a risk of a far worse outcome if the Greek crisis intensifies,” she warned.

Britain’s Barclay’s bank was more optimistic, revising upwards its growth forecast for 2015 to 1.3 per cent – equalling the prediction made last week by the EU’s executive arm, the European Commission.

Eurostat said that on an annual basis, fourth quarter GDP growth in the eurozone was up by 0.9 per cent, up from 0.8 per cent in the third quarter.

Over the whole of 2014, the euro area expanded by 0.9 per cent, compared to losses of 0.5 per cent and 0.7 per cent in the previous two years.

In the 28-member EU, the economy grow by 0.4 per cent on a quarterly basis and by 1.3 per cent year-on-year. Full-year 2014 growth was 1.4 per cent, from zero in 2013 and -0.4 per cent in 2012.

Since the global financial crisis of 2008, Europe has lagged behind other major economies.

Friday’s data from Eurostat also showed that GDP in the United States grew by 0.7 per cent quarter-on-quarter and by 2.5 per cent year-on-year in the final three months of 2014.

GNA

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