Are France and Germany emerging from recession?

Are France and Germany, two of Europe’s biggest economies showing signs of emerging from recession? The French and German economies both grew by 0.3% between April and June bringing to an end five consecutive quarters of contraction in real national output. Hugh Pym has a video report here.

The rebound in production is probably due to the impact of large government stimulus programmes and there will be doubts about how durable this recovery will be once the stimulus is drawn back and the deflationary effects of rising unemployment take hold.

Germany is an export-dependent economy and their industrial and capital goods sectors have been hit incredibly hard by the credit crunch and the 10% collapse in global trade in 2009. So her economy will stand to benefit from any upturn in the global economy.

The European Central Bank has followed other central banks in using monetary policy to simulate demand and bolster the finances of the banking system. It has cut its main interest rate to a record low of 1% and is pumping cash into the economy through a programme of quantitative easing to buy up to €60 billion in bonds in response to the recession and slowdown in inflation.

Britain remains mired in recession (our GDP shrunk by 0.8% in the second quarter). But a return to growth in France and Germany will also aid our prospects of recovery, as they are two of our main export markets.

For the sixteen nations participating in the single currency, national output dipped by 0.1% in the second quarter. The European Union as a whole - which includes the UK and a host of hard-hit Eastern European countries - saw a decline of 0.3 per cent in GDP.

More on signs of an economic upturn in France and Germany here from the BBC news site Hugh Pym has this video report on the fragile nature of the UK economy and the problems of people actively searching for work.