As Germany and France rebound, global recovery grows

Germany and France, the two largest economies in Europe posted modest third quarter GDP growth. Germany's economy grew 0.7% in the period that ended September 30 and France announced a 0.3% improvement. In the second quarter, both countries had also reported a tiny up-tick in GDP.

These tiny advances were consistent with growth in other wealthy nations, particularly the U.S. They were also almost certainly caused by the stimulus packages that many E.U. nations have in place. That raises the question of how developed countries will fare once their governments stop pumping liquidity into the financial system.

E.U. nations face the same problems that the U.S. does: unemployment and tight credit. The Bank of England in particular, is trying to solve this by mainlining money into its banks. So far, the results have been muted. But its stimulus package will run out and its national debt is high enough to have drawn concern from credit ratings agencies. England does not have a single additional pound to put toward priming the pump of growth.

The fourth quarter will be the litmus test for most of Europe, where the holiday spending season is a critical barometer for consumer spending, just as it is in the U.S. Signs that stimulus packages have not boosted the purchase patterns of individuals could signify that they have had almost no effect at all.

There is s curious optimism that spring from a tepid 0.3% growth rate. It could be that such small growth is expected after such a brutal recession, but 0.3% still hugs the flat line and shows how tentative the economic recovery remains.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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