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 European Economy Grows 2%             07/30 06:26

   

   FRANKFURT, Germany (AP) -- Europe emerged from a double-dip recession in the 
second quarter with stronger than expected growth of 2.0% over the quarter 
before, according to official figures released Friday, as southern European 
economies previously hard hit by the pandemic showed surprisingly strong 
results.

   But the economy in the 19 countries that use the euro currency still lagged 
pre-pandemic levels and trailed the faster recoveries in the U.S. and China, 
with the delta variant continuing to cast a shadow of uncertainty over the 
upturn.

   The growth figure for the April-June quarter announced Thursday by the 
European Union's statistics agency Eurostat compared to a drop of 0.3% in the 
first quarter as the 19 countries that use the euro endured a double-dip 
recession after a rebound in mid-2020. The second-quarter growth figure was 
stronger than the 1.5% foreseen by market analysts.

   Italy, which saw 128,000 pandemic deaths and a deep recession, was a major 
positive surprise, growing 2.7% as consumer spending revived. Portugal boomed 
with 4.9%. Meanwhile growth returned in major economies France, which grew 0.9% 
compared to the previous quarter, and Germany, which saw growth of 1.5% after a 
sharp drop of 2.1% in the first quarter. German auto companies in particular 
have shown strong profits despite a shortage of semiconductor components as 
global auto markets recover, particularly for the higher-priced vehicles sold 
by Mercedes-Benz and by Volkswagen's Audi and Porsche luxury brands.

   Yet the recovery lags the one in the U.S., where the economy surpassed its 
pre-pandemic level during the quarter. Friday's figures leave the eurozone 3% 
smaller than before the virus outbreak, according to Capital Economics. China 
was the only major economy to continue growing during pandemic year 2020.

   The stronger performance in southern Europe may be the result of stronger 
spending by households as restrictions are eased, said Andrew Kenningham, chief 
Europe economist at Capital Economics. Spain, with growth of 2.8% and consumer 
spending up 6.6%, both illustrated the rebound and underlined how far it has to 
go. Gross domestic product remains 6.8% below where it was before the pandemic.

   Lagging vaccinations held back the European economy in the first part of the 
year but have made steady progress since. Yet the spread of the more-contagious 
delta variant has led to predictions that it may slow, though not derail, the 
economic upturn. Travel and tourism, key for places like Spain and Greece, are 
recovering but remain subdued.

   "Given its reliance on tourism, the Spanish economy looks especially 
vulnerable to the delta variant that is forcing several regions in the country 
to impose new restrictions, while foreign governments are discouraging trips to 
the Iberian Peninsula," said Edoardo Campanella, economist at UniCredit Bank in 
Milan.

   Officials figures Friday also showed eurozone unemployment at 7.7% in June, 
down from 8.0% in May. Inflation rose to 2.2% in July from 1.9% in June.

   The eurozone economy has been sustained by government spending on pandemic 
relief including subsidies for companies that keep furloughed workers on the 
payroll. The European Central Bank is adding monetary support by keeping 
interest rate benchmarks at record lows and by purchasing 1.85 trillion euros 
($2.2 trillion) in government and corporate bonds through at least March 2022. 
That step drives down longer-term borrowing rates and helps keep credit flowing 
to businesses and governments.

 
 
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