Eurozone manages to avoid recession

London: Europe dodged a bullet yesterday after the economy of the 17 countries that use the euro narrowly avoided a recession in the first quarter of the year despite a raging debt crisis that's raising the spectre of the break-up of the currency union.

There was one reason why the Eurozone avoided an overall recession — officially defined as two consecutive quarters of negative growth. Germany, Europe's biggest economy, was behind the better-than-expected performance as strong export figures helped it grow by 0.5 per cent — equal to the US economic performance.

"The euro area might have dodged recession, but it is firing on only one cylinder," said James Ashley, senior European economist at RBC Capital Markets.

Stark disparities

Huge economic disparities exist across the single currency bloc. Of the euro's 17 members Ireland, Greece, Spain, Italy, Cyprus, the Netherlands, Portugal and Slovenia are in recession.

Though Eurostat, the EU's statistics office, revealed that the Eurozone posted flat output in the first quarter — against expectations that it might actually slip into recession with a 0.2 per cent decline — there are growing concerns that the months ahead will be as difficult as any the currency union has faced since its creation in 1999.

The political turmoil in Greece has ratcheted up fears of a disorderly debt default that could lead to the country's exit from the single currency and set off a chain reaction of contagion across the Eurozone.

For many, including the left-wing Syriza party in Greece which stormed to a shock second in last week's general election, the answer rests on abandoning austerity.

New French President Francois Hollande is expected to press the case for a more growth-friendly approach to the debt crisis when he meets German Chancellor Angela Merkel.

Kickstarting economic growth was a central plank of Hollande's electoral platform.

"It seems unlikely that anything tangible will come out of the meeting though it seems likely that the subject of growth and fiscal discipline will be on the agenda given the French President's comments on the subject in his election campaign," said Michael Hewson, markets analyst at CMC Markets.

Merkel has preached a cocktail of austerity and economic reforms as the only viable and long-lasting route out of the debt morass.

Greece, which is currently without a government and appears on course for another general election in June following last week's inconclusive poll, saw its economy contract by an annual rate of 6.2 per cent, slightly better than the 7.5 per cent decline recorded in the previous three month period.

The Greek government agreed to a harsh austerity program in order to qualify for an international bailout.

The figures are subject to change as Eurostat continues to collect figures. Several countries, including Ireland and Slovenia, have yet to release quarterly figures and for Greece there are only year-on-year comparisons.