Arab Today, arab today europe in crisis talks as german economy grows
Last Updated : GMT 12:24:19
Arab Today, arab today
Arab Today, arab today

Europe in crisis talks as German economy grows

Arab Today, arab today

Arab Today, arab today Europe in crisis talks as German economy grows

Paris - AFP

European leaders and the IMF chief headed into fresh talks on the eurozone on Wednesday as new data showed the German economy was able to grow robustly last year despite the drag of the debt crisis. IMF head Christine Lagarde began talks with French President Nicolas Sarkozy after France received some rare good news on Tuesday with an assurance from ratings agency Fitch that it would not downgrade French debt this year. After meetings this week with Sarkozy and Lagarde, German Chancellor Angela Merkel was to hold talks in Berlin later Wednesday with Italian Prime Minister Mario Monti, as part of a flurry of German diplomatic action on the crisis. Strengthening Merkel\'s hand in her effort to promote fiscal responsibility, data showed Wednesday that the German economy, Europe\'s biggest, remained the powerhouse and one of the few bright spots in the eurozone. German gross domestic product (GDP) expanded 3.0 percent in 2011, compared with record growth of 3.7 percent the previous year, even though the eurozone crisis began to crimp growth in the fourth quarter, official data showed. The strong performance enabled Germany to bring down its public deficit to just 1.0 percent of GDP last year from 4.3 percent a year earlier. Germany also paid a record low rate at an auction of five-year bonds on Wednesday amid huge demand, suggesting nervous investors are flocking to the safe haven of Europe\'s top economy. It received bids for nearly nine billion euros ($11 billion) for the four billion euros of its five-year bond on offer, with an average yield of just 0.90 percent. Elsewhere in the 17-nation eurozone, however, prospects were less rosy. The European Union revised downwards its figure for eurozone growth over the third quarter of last year, to 0.1 percent. The previous figure given was 0.2 percent but detailed EU data showed a drop on France\'s previously published growth rate between July and September, from 0.4 percent to 0.3 percent, which caused the revision. Economists are watching closely to see if the first estimate for the all-important final three months of 2011 shows the eurozone dipping into recession. Data also showed Wednesday that eurozone banks stashed a record sum with the European Central Bank, suggesting tensions in the financial system remain despite huge injections of cash. Banks parked 485.9 billion euros with the Frankfurt-based ECB on deposit for 24 hours, beating the record set the previous day. The phenomenon is especially significant because it comes after eurozone banks borrowed nearly half a trillion euros from the ECB last month in a brand-new three-year lending facility. Ahead of his talks with Merkel, Monti made it clear that he believed Italy deserved more than just a scolding from Germany. \"Unfortunately, we have to say that our reform policies have not received the recognition and appreciation in Europe that they deserve,\" Monti told German daily Die Welt. \"If the Italian people do not soon see tangible success for their savings and reform efforts, there will be a protest against Europe, against Germany -- seen as the driver of EU intolerance -- and against the ECB,\" he added. Monti came to power in November at the head of an unelected government of technocrats after a wave of financial market panic and a parliamentary revolt forced the resignation of scandal-hit Silvio Berlusconi. Monti has pushed through a crushing austerity plan in an attempt to fix the nation\'s problems. Italy\'s Istat data agency said Wednesday that the country\'s public deficit fell to 2.7 percent in the third quarter from 3.5 percent 12 months earlier -- its lowest level since the fourth quarter of 2008. Meanwhile, as talks continued on a new EU budgetary pact, a draft version of the new rules seen by AFP showed EU members backing away from granting more power to Brussels. The latest version of the text for the new pact on fiscal discipline, which is expected to be apply to all EU members except Britain and to be signed on March 1, was handed out to the 26 governments involved on Tuesday. The new draft removes the power of the European Commission to take a eurozone state to court for breaking the rules on budget limits and rules out extending sanctions on budget deficits to cover public debt.  

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