Eurozone growth is better, but not sparkling

But Italy has slipped into recession. Its economy shrank 0.5% and has now contracted for six months, the usual definition of recession.

Eurozone growth was 0.5% in the January to March period, up from 0.2% in the previous three months, Eurostat said.

But a gloomier view came from the European Central Bank, whose advisers trimmed their 2005 and 2006 forecasts.

The ECB's panel of economists said Italy and Germany were both "persistently-underperforming countries" that needed to make structural changes to strengthen their economies in the longer term.

Cautious outlook

It predicted 2005 growth in the 12-nation eurozone would come in at 1.6%, rather than 1.8% as suggested in its last monthly forecast.

For 2006, it expects the eurozone to expand by between 0.2% and 0.6%. This compares with their last forecast of 0.3% to 0.7%.

The European Commission has also lowered its eurozone growth forecast, though its downgrade covered only the three months to June 2005.

The Commission lowered its forecast to between 0.2% to 0.6%, shaving 0.1% off both ends of the range.

Limited revival

Although Germany's quarterly growth rate was its best in four years, it remains fragile. Its economy grew 1.0% in the January-to-March period, after shrinking 0.1% in the previous quarter.

The pick-up in the economy was "driven exclusively" by a rise in net exports, the country's Destatis statistical bureau said.

Domestic demand in Germany declined overall, and so did imports.

Although Germany's performance beat economist expectations of 0.5%, growth was unchanged on a year ago.

Meanwhile, Italy's recession sparked predictions its economy may not have any growth all year.