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Germany, Ireland to lead European growth

Tuesday, February 25 15:43:26

The European Commission today published its latest growth forecasts, putting Ireland and Germany at the top of the growth league in 2014.

Its winter forecast foresees a continuation of the economic recovery in most member states and in the EU as a whole. After exiting recession in spring 2013 and three consecutive quarters of subdued recovery, the outlook is for a moderate step-up in economic growth.

Brussels slightly increased its growth prediction for the euro zone's E9 trillion economy to 1.2pc in 2014 from an earlier 1.1pc forecast.

It was powered chiefly by a 1.8pc jump in Germany.

The Commission also predicts strong growth for the Irish economy, with GDP growth of 1.8pc pencilled in for 2014 followed by growth of 2.9pc in 2015.

It also forecasts that the unemployment rate here will ease to 11.9pc this year, with a further fall to 11.2pc predicted for next year.

The country's debt is set to ease to 120.3pc of GDP this year before falling to 119.7pc in 2015.

But the statistics also made clear the scale of the challenge facing Italy and its new prime minister, Matteo Renzi, in turning around the bloc's third-largest economy.

The Commission predicts meagre growth of 0.6pc in Italy this year. France is expected to grow by 1pc in 2014.

"Recovery is gaining ground," said Olli Rehn, the EU commissioner in charge of economic policy. "The worst of the crisis may now be behind us," he said, cautioning, however, that the recovery was "still modest".

While the improving outlook will relieve the European Central Bank, the figures also outline how Europe still lags the US.

The US economy is expected to grow by around 3pc in 2014, boosted by massive money printing programmes that the European Central Bank has been unable to emulate.

Under its statutes, the ECB is banned from buying bonds directly from governments, although it can find ways to buy them from banks, for example, on the open market or accept them as security in return for finance.

Markets expect the ECB's next move could be to offer a further round of cheap, long-term loans to banks.

Complicating the picture further for the ECB, the Commission sees consumer price inflation at well below the central bank's target of around 2pc. Inflation is likely to be 1pc in 2014 and 1.3pc next year.