Eurostat: Europe's economy avoids recession but split grows

The euro zone just avoided recession in early 2012 but the region's debt crisis sapped the life out of the French and Italian economies and widened a split with paymaster Germany.

Euro zone gross domestic product stagnated in the first quarter, the EU's statistics office Eurostat said today.

That was a touch better than forecast by economists, who had expected a 0.2 percent slump, and dodging a technical recession following a 0.3 percent contraction in the last three months of 2011.

A surprisingly strong 0.5 percent expansion by Germany, Europe's biggest economy, appeared to save the bloc from recession, even as the French economy stalled and Italy reported weaker-than-expected output that epitomized southern Europe's anaemic economies.

Barely out of the 2009 financial crisis, businesses and households in much of Europe are hampered anew as governments cut back on spending to curtail budget deficits and companies freeze plans to invest.

Despite two summits this year and another planned for next week, EU leaders have been unable to find a way back to growth, while many southern Europeans are turning against austerity measures, holding huge street protests in Madrid and backing radical political parties in Greece's recent elections.

Optimism in January that the euro zone would recover quickly in 2012 has been crushed by unexpected contractions in manufacturing, consumer confidence and business morale, while one in 10 euro zone workers is out of a job.

Germany's economy, lifted by exports of precision machinery and luxury cars, bounced back from a 0.2 percent contraction in the last three months of 2011.

Austria, Slovakia and Finland also posted modest growth.