Business, Economics and Jobs

German growth standstill casts cloud over Sarkozy-Merkel debt talks

Germany's Federal Statistical Office sent European stock markets into glum retreat Tuesday with figures showing growth in the continent's most successful economy had sunk to a barely-breathing 0.1 percent over the previous quarter.

Meanwhile Brussels said growth in the 17-nation euro area was crawling along at 0.2 percent in the second quarter, down from 0.8 percent in the previous three months.

The figures, following up from data last week showing the French economy was at a standstill, cast a dark cloud over a meeting later Tuesday between French President Nicolas Sarkozy and his German counterpart, Angela Merkel.

The continent's "power couple" are set to meet in Paris to discuss ways out of Europe's debt crisis.

"German Chancellor Angela Merkel will discuss the bloc's endless debt crises with French President Nicholas Sarkozy later Tuesday, and the latest growth news out of the currency bloc may only add urgency to their discussions," The Wall Street Journal said.

The New York Times said the data out of Germany was ominous:

Germany’s economic rebound since the recession of 2009, driven by exports of cars, machinery and other goods to China and other emerging markets, has helped counterbalance weak growth in southern Europe. If Germany slows, the challenges posed by Europe’s sovereign debt crisis will become that much more daunting.

Zero growth in Europe's leading economies will make it harder for the euro-zone as a whole to keep the likes of Greece, Portugal, Ireland and even Italy and Spain afloat in a suffocating sea of debt.

Analysts said Germany's worse-than expected growth result was linked to consumer belt-tightening, the closure of nuclear power plants and declining export sales in markets like Britain.

"It now looks like growth is slowing in core countries too," Commerzbank economist Christoph Weil wrote in a note, the New York Times reported.

"This could intensify the sovereign debt crisis in so far as the readiness and ability of countries with high credit ratings to help crisis-stricken countries will drop as a result. This could trigger a downward spiral in economic growth."