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German and French economies grow in third quarter German and French economies grow in third quarter
(about 1 hour later)
Both the German and French economies recorded growth in the third quarter of the year, according to official data.Both the German and French economies recorded growth in the third quarter of the year, according to official data.
Germany's gross domestic product (GDP) grew by 0.5% in the quarter, and growth in the April-to-June period was also revised up to 0.3% from 0.1%.Germany's gross domestic product (GDP) grew by 0.5% in the quarter, and growth in the April-to-June period was also revised up to 0.3% from 0.1%.
The annual growth rate was 2.5%, down from the second quarter's 3% rate.The annual growth rate was 2.5%, down from the second quarter's 3% rate.
In France, the economy grew by 0.4%, better than expected, although its second quarter figure was revised downwards to show GDP fell by 0.1%.In France, the economy grew by 0.4%, better than expected, although its second quarter figure was revised downwards to show GDP fell by 0.1%.
The French statistics institute said increased household spending was behind the rise in the third quarter, while Germany's statistics office said domestic demand was the main reason for its growth.The French statistics institute said increased household spending was behind the rise in the third quarter, while Germany's statistics office said domestic demand was the main reason for its growth.
Most observers expect the German economy to contract sharply in coming months. Observers expect the German economy to contract sharply in coming months.
The Organisation for Economic Co-operation and Development (OECD) estimated on Monday that GDP would shrink by 1.4% in the last quarter of 2011. On Monday, the Organisation for Economic Co-operation and Development (OECD) estimated that German GDP would shrink by 1.4% in the last quarter of 2011.
Last week, Germany's panel of economic advisers, known as the "wise men", said while they expected 3% growth this year, they were expecting 0.9% next year, just under the latest government forecast of 1%. Last week, Germany's panel of economic advisers, known as the "wise men", said that while they expected 3% growth this year, they were expecting growth of just 0.9% next year, just below the latest government forecast of 1%.
Market tensions
On the financial markets, the difference between interest rates on French and German bonds reached a record on Tuesday.
The gap between the yields - or implied interest rates - on German and French 10-year bonds widened to 1.726 percentage points.
The yield on French bonds rose to 3.5%, while on German bonds it fell to 1.775%.
That implies that France would pay about twice as much as Germany to borrow money if those rates were in force when the countries came to issue new bonds.