Eurozone growth slows as Italy woes weigh

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Europe

Growth in the eurozone slowed significantly in the third quarter, official data showed on Tuesday, as Italy experienced economic troubles and car production in Germany was disrupted.

Gross domestic product in the 19-country single currency area rose by just 0.2 percent from July to September, the Eurostat agency said, compared with 0.4 percent in the preceding quarter and analyst forecasts, also for 0.4 percent.

The disappointing data come with Brussels locked in a standoff with Rome over its plans for larger deficits despite the high public debt load.

Italy, the eurozone's third largest economy, in August slashed growth forecasts for the year from 1.5 percent to just 1.2 percent, and earlier this month, Moody's ratings agency cut the country's credit rating to a notch above junk status.

On a year-to-year basis, economic growth in the eurozone reached 1.7 percent, well below the 2.2 percent rate seen in the previous quarter.

Bert Colijn, Senior Economist at ING bank, said the 0.4-percent growth seen in the second quarter "may have felt like a disappointment at the time, but could well have been a last hurrah of the growth cycle."

Hold-ups in car production in Germany related to testing for new emissions rules likely dragged on growth in the 19-country eurozone's economic powerhouse, but Colijn said developments in Italy were a greater concern.

"Perhaps more worrying was the stagnation of growth in Italy, which was the first time in four years that the economy did not post growth over a quarter," Colijn said.

"With budget discussions already tense between Rome and Brussels, this stagnation will only add to concerns."

But Jessica Hinds of Capital Economics gave a more upbeat assessment, suggesting the slow growth was due to "temporary factors" and "some recovery in the coming quarters" could be expected.

Source(s): AFP