Germany and France, euro region’s two largest economies, returned to growth in the second quarter which may bail Europe out of its worst recession since the Second World War and help in global economic recovery. This growth brought the drop in the 16-nation bloc’s GDP down to just 0.1%, outperforming the US and the UK.

Analysts are worried that these are short term signs and the recovery is likely to run out of steam once the stimulus packages and the government policies to support spending expire.

The second quarter growth was mainly driven by government and household spending in Germany and France. French President Nicolas Sarkozy has committed to a stimulus package worth 30 million euros while that of German Chancellor Angela Merkel is worth 85 billion euros.

Cash for clunkers has been another highlight amongst the policies adopted by both of these countries. It has encouraged consumers to spend by providing subsidies on scrapping old vehicles and buying newer ones which are less polluting and higher on mileage.

Not all European economies are growing. Italy and Holland reported decline in their respective GDPs and Spain is also forecast to report a drop when it announces its Q2 figures today.

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