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Last Updated: Thursday, 12 August, 2004, 10:43 GMT 11:43 UK
New growth for France and Germany
Champs-Elysees, Paris, France
France's economy has been getting brighter for some time
The French economy has continued its recent upturn, recording growth of 0.8% during the second quarter of 2004, official figures have shown.

The rate was higher than forecast and raises hopes the country can help drive growth across the 12-nation eurozone.

Meanwhile, the German economy grew by 0.5% in the second quarter compared with the previous three months.

The two largest eurozone economies performed better than Italy, which this week revealed 0.3% quarterly growth.

The good news for the pair comes weeks after the European Court of Justice annulled a decision by EU finance ministers to suspend action against the two countries over budget deficits.

France and Germany are on track to again break the eurozone's Stability and Growth Pact, meant to keep the deficits of eurozone states below 3% of GDP.

'Good result'

In France, the latest GDP figure, issued by statistics office INSEE, came on top of 0.4% growth in the previous quarter.

INSEE also said France's economy could grow by 2.2% during 2004, while the government is forecasting growth of about 2.3%.

"The numbers are a positive surprise," said Jan-Eric Fillieule, economist at CCF.

"After a very good first quarter, we now see a consolidation in the second. That is a very good result."

Economists see France as a potential driver of growth in the eurozone economy, because of French consumers' keenness to go shopping for new goods.

The French government has recently undertaken a campaign to encourage people to spend more in order to promote growth.

German growth 'to slow'

In Germany strong exports offset stagnant domestic demand, to produce the biggest increase in GDP since the first quarter of 2001.

"This is an usually strong increase for Germany, but domestic demand almost stagnated despite the booming global economy," said analyst Joerg Kraemer at Invesco.

"Important leading indicators suggest that highpoint of the global economic cycle is already behind us.

"For this reason, the German economy will grow more slowly in the second half than the first."

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