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  • Feb 19th, 2005
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The eurozone is likely to see moderate economic recovery in 2005 despite some disappointing growth data and Germany could deliver a positive surprise in the first quarter, a top European Central Bank official said. Germany is critical to the eurozone's performance, accounting for about a third of its output. Its shocking 0.2 percent contraction in the fourth quarter dragged down the region's growth. But Axel Weber, the ECB Governing Council member who heads Germany's Bundesbank, told Reuters the weak results should not be overinterpreted.

"Despite the sideways movement of Germany in the second semester (second half) of last year my view is that the recovery scenario remains in tact," he said in an interview.

Germany grew by 0.4 percent in the final three months of 2004 if statistical adjustments for working days are removed, he said.

"That would suggest that a positive surprise is possible in the first quarter of 2005 when the number of working days is below the average," he told Reuters in an interview.

Germany's data currently are distorted by calendar effects that increased the number of working days in the fourth quarter, making quarter on quarter comparisons difficult. Once the statistical adjustments made to offset the working day effects and other seasonal factors are excluded, Germany's performance looks better, Weber said.

Moreover, the drivers are in place for faster growth ahead in the eurozone's largest economy, he said in an interview late Thursday, conducted on condition it be released on Friday.

All the same, the Bundesbank has revised down its 2005 forecast for Germany to around 1.0 percent after adjustments, he said. In December, Weber expected 1.3 percent growth.

Shrinkage in both Germany and Italy caused fourth quarter eurozone Gross Domestic Product to come in at 0.2 percent, half the expected rate. Annual growth was 2.0 percent for 2004 - a little below the ECB's mid-point projection of 2.2 percent.

"The data provide a mixed picture for the economic situation in the eurozone," Weber said.

"I think we have to say the start for 2005 took place with less momentum than would have been expected. However, like for Germany, a continuation of a moderate recovery process is still the most probable scenario also for the euro area," he said.

He pointed to strong order inflow in October and November and significant increases in the Purchasing Managers Index in December and January.

Copyright Reuters, 2005


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