Eurozone economy stalls on setback in Germany

BRUSSELS, Aug 14 (AFP): Growth in the 18-country eurozone ground to a standstill in the second quarter, official data showed Thursday, dragged down by France and Germany and casting a cloud over recovery in the crisis-battered region.
Stagnation in the currency bloc, already threatened by deflation, fell short of analysts' forecast of 0.2 per cent.
The figures will force governments to cut back their growth estimates for the rest of the year, putting budget deficit targets into jeopardy, and also clouding the outlook for growth of the global economy.
The unexpectedly low growth figure was mainly the result of a surprise 0.2-per cent shrinkage in Germany, usually the reliable eurozone growth engine, and stagnation in an already fragile French economy.
"Strong growth figures in some of the former crisis countries and small Eastern member states were not enough to offset the slowdown in Germany ... hit by the 'Putin factor' as well as the reform laggards France and Italy," said Christian Schulz, economist at Berenberg Bank.
Italy has already reported contraction of 0.2 per cent for the quarter, while Spain, in need of a boom after years of deep crisis, disappointed somewhat with growth of 0.6 per cent.
Analysts expected that growth would accelerate later in the year, but with geopolitical tensions in Ukraine-the so-called Putin factor-enduring, there is now deep concern that a fragile recovery in the eurozone may be in danger.
"It now looks very likely that GDP (gross domestic product) growth for the whole of 2014 will remain below 1.0 per cent," said analyst Peter Vanden Houte of ING Bank.
France, showed zero growth for the second quarter running, forcing the government to downgrade its outlook for the year by half on Thursday, to 0.5 per cent instead of 1.0 per cent.
French Finance Minister Michel Sapin said that "growth has broken down, in Europe and in France". And he admitted that France would now overshoot its promise to the EU that its public deficit would be cut to 3.8 per cent of output in 2014.
Analysts have warned for months that France, with the second-biggest economy in the eurozone, looks increasingly the weak link in a halting European recovery, as the government struggles in its efforts to push through reforms.