Brussels urges austerity, despite return to growth

BRUSSELS - The European Commission told EU member states to stick to their austerity programmes on Friday, despite new figures showing better than expected GDP growth for the second quarter of 2010.

According to flash estimates from Eurostat, the EU's statistical office, the gross domestic product of both the euro area and in the whole of the EU increased one percent compared with the first quarter.

Compared with the same quarter of the previous year, GDP increased by 1.7 percent in both the euro area and the EU27.

The commission's economy spokesman, Amadeu Altafaj Tardio, welcomed the estimates as "a promising figure that confirms that recovery is on track," but he also stressed that states should remain cautious.

"The recovery is still fragile, there are elements of uncertainty that we should not ignore," he told reporters on Friday.

The commission still expects member states to continue to develop their "exit strategies" from fiscal stimulus plans instituted in the wake of the economic crisis, but it says there is "no one-size-fits-all policy" and the approach should be differentiated.

"Countries which have larger fiscal space can still allow themselves to continue stimulating sector of their economic activity, however all member states at the latest in 2011 should move forward in terms of fiscal consolidation efforts and it is a delicate balance that has to be stricken," Mr Tardio said.

Germany was the leader of the recovery in the second quarter, with a growth rate of 2.2 percent, its best result since re-unification in 1990. France's GDP increased by 0.6 percent, while Spain, Italy and Portugal each reported increases of less than 0.5 percent. The only country with negative growth when compared with the beginning of the year was Greece, whose decline was far worse than had been predicted.

"The recovery of the German economy, which lost momentum at the turn of 2009-2010, is really back on track," the German statistical office said in its press release. The main contributors to growth were foreign trade and household and governmental expenditure.

German economy minister Rainer Bruederle also remains optimistic about the country's economic prospects. "We are currently experiencing a major upswing," he was quoted as saying by Der Spiegel.

According to Mr Bruederle, the growth of more than two percent for 2010 is "entering into the realm of possibility." The government has so far anticipated growth for the year at 1.4 percent.