Germany just escapes recession

BERLIN/PARIS - Germany narrowly avoided recession in the third quarter of the year and France exceeded low expectations, putting the euro zone on course for anaemic growth but no contraction.

Europe's largest economy eked out 0.1 per cent growth from the previous three months, the German statistics office said on Friday, following a revised 0.1 per cent fall in the second quarter.

A strong rise in consumer spending and small boost from foreign trade prevented a worse result.

France expanded by 0.3 per cent on the quarter, beating forecasts for 0.2 per cent growth, marking its best performance in more than a year. But its second quarter was revised down to show a 0.1 per cent fall in GDP.

Reuters polling has produced a consensus forecast of 0.1 per cent growth in the euro zone as a whole, matching its paltry second-quarter performance. That figure is due at 1000 GMT (5 a.m. EST).

President Francois Hollande's Socialist government expects growth of just 0.4 per cent for the whole year, less than half its initial forecast, and has said it would miss a pledge to bring its public deficit down to 3 per cent of GDP next year.

The German government's panel of independent economic advisers cut its forecasts on Wednesday for growth in 2014 to 1.2 per cent from a previous 1.9. It did not expect any acceleration next year, pencilling in growth of just 1.0 per cent.

Spain has already reported steady 0.5 per cent growth and few if any of its peers are likely to better that.

"Activity has somewhat taken off but remains too weak to create the jobs our country needs," French Finance Minister Michel Sapin said in a statement, reiterating his call for more action to boost growth and jobs in Europe.

Italy and France have been pressing the EU to focus more on measures to boost growth rather than cut debt in order to prevent a slide back into recession. Germany, the country with the current account surplus to spend more, will not budge.

That debate is likely to flare back into life as G20 leaders gather in Brisbane for their annual summit this weekend.

US Treasury Secretary Jack Lew gave an unusually blunt assessment of what he thinks Europe needs to do this week, arguing that France and Italy should rein in budget deficits more slowly and that it was "critical" Germany and the Netherlands loosen their fiscal purse strings.

Germany's Chamber of Commerce DIHK urged the government to change course and go for a more business-friendly policy. "That would help to lift the brake on investment," said DIHK managing director Martin Wansleben, responding to the GDP data.