Record German Growth Drives Euro-Region Expansion

Germany’s economy grew in the second quarter at the fastest pace since the country’s reunification two decades ago, driving faster-than-forecast expansion in the 16-nation euro area.

German gross domestic product surged 2.2 percent from the first quarter, fueling euro-area growth of 1 percent, the fastest in four years. Economists had forecast GDP would rise 1.3 percent in Germany and 0.7 percent in the currency bloc. Germany, Europe’s largest economy, is benefiting from a recovery in global demand after last year’s recession just as the euro’s 10 percent decline against the dollar this year makes its exports more competitive outside the region. At the same time, European governments are cutting spending to rein in ballooning budget deficits, threatening to slow growth in coming months.

“It’s a Germany-driven story,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “While there are growth risks stemming from the fiscal consolidation efforts in peripheral countries, we won’t see a double-dip scenario in Europe.”

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