SLOWDOWN FEARS:GERMAN ECONOMIC growth slowed to a near standstill in the second quarter of this year, dealing a further unexpected blow to the crisis-hit euro zone.

The surprisingly sharp deceleration in activity in Europe’s largest economy hit overall euro zone growth and intensified fears about the global slowdown. It also threatened to complicate the challenge facing the region’s policymakers as they seek to combat its escalating debt crisis.

German gross domestic product increased by only 0.1 per cent in the three months to June compared with the previous quarter, the country’s statistical office reported. Germany had been a star performer among western industrialised economies in the first quarter of this year. But data for the first quarter were also revised down to show a rise of 1.3 per cent compared with the 1.5 per cent originally reported.

The figures marked “a turning point in the German business cycle”, said Andreas Rees, economist at Unicredit in Munich.

“It is a regime shift. The period of exuberant growth is now behind us.”

The economy’s skid almost to a halt left a deep impression on euro zone growth data released later by Eurostat, the EU’s statistical office. It said GDP across the 17-country bloc rose by only 0.2 per cent in the second quarter, after a 0.8 per cent rise in the first three months of the year.

That brought euro zone growth in line with the pace seen in the UK, which also expanded by 0.2 per cent in the second quarter, and below the 0.3 per cent rate of expansion seen in the US.

Germany’s disappointing data followed unexpectedly weak French GDP figures on Friday, showing growth in the euro zone’s second largest country was flat in the second quarter and weakened stock markets across Europe. The euro slid from three-week highs against the dollar.

Italy emerged as an unlikely best-performer among the euro zone’s largest economies, having already reported a 0.3 per cent rise in second quarter GDP.

– (Copyright The Financial Times Limited 2011)