The 19-country eurozone economy weathered the second quarter's troubles — notably the escalating crisis in Greece — with only a small drop in growth, but disparities between nations remain that could cause problems.
Economic growth was 0.3 percent in the March-June period on a quarterly basis, down slightly from 0.4 percent in the first three months of the year and just half the rate recorded in the United States, the European Union's statistics agency said Friday.
As has been the case for much of the past few years during the eurozone's crisis over high government debt, growth remains heavily reliant on the region's powerhouse economy, Germany.
An increase in Germany's growth rate, largely due to strong exports in the wake of the euro's sizeable drop since last year, helped offset a sharp slowdown in France. The eurozone's second-largest economy stagnated as investment eased and consumer spending was lackluster.
While Germany saw growth accelerate to 0.4 percent from 0.3 percent in the quarter before, France saw no growth at all following a strong 0.7 percent rise in the first three months of the year.
"France appears to have relapsed into its role of the sick man of the eurozone,'' said Chris Williamson, chief economist at Markit.
The disappointment wasn't confined to France. Italy, the eurozone's third-largest economy, saw growth dip to 0.2 percent from 0.3 percent — far too little if it is to make up for recent years' declines.
Together, the two economies account for around 40 percent of annual eurozone GDP, so their fortunes are key to the wider region.
"Stagnation in France and near-stagnation in Italy underline that in both countries, firms and households remain deeply concerned about the future,'' said Tom Rogers, a senior economic adviser to EY.
Admittedly, there were reasons to be fearful in the second quarter. Greece appeared headed for a messy exit from the euro, with uncertain consequences for the region, while concerns over the Chinese economy were roiling financial markets around the world.
Greek economy improves
The big surprise in the second quarter figures was the fact that Greece saw its economy grow 0.8 percent.
The figures also confirmed that the country, which is worth only around 2 percent of eurozone GDP, didn't fall into recession in the first quarter as previously thought, as the modest contraction previously recorded was revised up to no change.
Many economists reckon the second quarter growth was due to people spending in anticipation that the government would put limits on cash withdrawals — something it did just at the end of the second quarter.
Despite the strong figure, Greece is widely expected to experience a deep recession over the coming year or two. Though the radical left-led government is finalizing the bailout deal with its creditors, limits on money transfers and withdrawals remain and are choking the life out of the economy.
The hope is that the Greek economy might start improving when the cash controls are gradually lifted and that the sense of crisis that's threatened the euro currency bloc will abate.
Economists are also concerned that the eurozone's growth rate is not stronger considering the broader conditions are as rosy as they've been for years.
The euro remains at relatively low levels against the dollar, near $1.11, as the ECB continues to pump about 60 billion euros into the financial system every month. That should keep helping exporters, particularly in Germany.
More importantly for the average European household, oil prices are falling again — on Friday, the New York benchmark rate slid to $41.35 a barrel, its lowest level since early 2009. Money saved at the pump is money that can be used elsewhere. If inflation remains at super-low levels as a result, wages may continue to outstrip price rises, which should help spending.
Rogers cautioned that even if "the major existential risks'' the eurozone has faced ease, the risk is that governments will not show the same sort of urgency about making their economies more dynamic.
"If so, the pace of growth seen in the second quarter of this year might well turn out to be the pace that some countries will have to get used to,'' he said.