German growth nearly grinds to a halt

Germany’s economic growth nearly ground to a halt in the second quarter, highlighting fears that the so-called Wirtschaftswunder in Europe’s largest economy may be coming to an end.

Gross domestic product rose 0.1% in the April-June quarter from the preceding three months, the German statistics institute reported Tuesday, citing seasonally adjusted data. The figures mark a sharp slowdown after German GDP expanded 1.3% in the first quarter.

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“The German economy, accustomed to success, is unable to decouple from slowing global economic growth,” said Joerg Kraemer, chief economist at Commerzbank AG, in a note.

He lowered his forecast for German growth in 2011 to 3% from 3.4% previously.

Carsten Brzeski from ING Bank said the German performance “should not be considered a disappointment but rather a growth normalization“ after the stellar performance in the first quarter and given several external shocks such as the Japanese earthquake in March, the rise in oil prices and the U.S. economic slowdown.

“While German politicians are currently racking their brains on the pros and cons of common eurobonds, the luxury of having an economy running at `wonder’ speed is fading away,” Brzeski said in a note.

Reuters

German Chancellor Angela Merkel (right) welcomes France's President Nicolas Sarkozy before talks in Berlin in July.

The poor performance by Germany, combined with zero growth registered by France in the second quarter, contributed to a weak showing for the 17-nation euro zone.

The euro area’s GDP rose 0.2% in the second quarter from the preceding three months, after growing 0.8% in the first quarter, Eurostat said Tuesday. Growth in Spain and Italy was 0.2% and 0.3%, respectively.

Belgium and Austria were among the very few euro-zone nations that displayed some economic strength in the second quarter, with their GDPs growing 0.7% and 1%, respectively.

Tuesday’s data come as German Chancellor Angela Merkel is due to meet French President Nicolas Sarkozy in Paris later to discuss the euro-zone debt crisis.

The euro slipped 0.4% to $1.4385 ahead of the meeting.

Coutesy :Polya Lesova is chief of MarketWatch’s London bureau. (MarketWatch Inc.)