Merkel And Hollande Vow To Help Eurozone

Francois Hollande and Angela Merkel vowed to steer Europe through the economic storm after figures showed the eurozone narrowly avoiding a double-dip recession.

The single currency bloc's economy saw zero growth in the first three months of the year, beating forecasts of -0.2% and following a contraction of 0.3% in the final quarter of 2011.

The region has been dragged down by the debt crisis in southern Europe, led by Greece, which saw its economy contract by an annual rate of 6.2% as doubts were cast over its future membership of the single currency.

The data was released hours before the German Chancellor, who backs tough debt-cutting programmes, met with Mr Hollande in Berlin.

In a joint press conference Mrs Merkel said it was Germany's duty to help Greece grow as a nation.

Mr Hollande said France would do all it could to help keep Greece in the eurozone and vowed to work closely with Germany for the good of Europe.

The bloc's latest data was boosted by better-than-expected growth in Germany, the eurozone's largest economy.

Gross domestic product (GDP) in Germany rose by 0.5 % in the first quarter of the year, bouncing back from a 0.2% slide in the last three months of 2011.

But while Germany's robust growth confounded expectations, the region's next biggest economy, France, stagnated, showing no growth at all.

The divergent performance of the eurozone's two largest economies fuelled an austerity versus growth debate as the bloc teeters on the edge of a new crisis, centred on fears that Greece may be forced to leave the euro.

IMF chief Christine Lagarde has said that she hopes Greece will not leave, but added: "We have to be technically prepared for anything".

The debt-laden country is facing fresh elections next month after talks between its political leaders to try to form a coalition government collapsed following inconclusive polls eight days ago.

Opinion polls show anti-bailout, anti-austerity parties would perform most strongly in a new vote, placing doubt over whether or not Athens will sign up to a plan agreed with the EU and the International Monetary Fund to save it from bankrupcy.

But while the uncertainty has led to a number of key figures openly discussing the country's exit from the union, that suggestion was dismissed as "nonsense and propaganda" by EU policymakers.

Speaking after hours of talks in Brussels among the 17 finance ministers from the eurozone countries, group chairman Jean-Claude Juncker said: "I don't envisage, not even for one second, Greece leaving the euro area.

"This is nonsense; this is propaganda. The exit of Greece out of the euro was not the subject of our debate today. Absolutely no-one, absolutely no-one, argued in that sense.

"But the Greek public, the Greek citizens, have to know that we agreed on a programme and this programme has to be implemented."

EU officials have stressed that room for renegotiation of the 130bn euro bailout is limited, although Mr Juncker appeared to offer some leeway to Athens, if Greek parties manage to overcome differences and back the bailout reform plan.

Chancellor George Osborne criticised countries for speculating over Greece's possible exit from the euro.

"The eurozone crisis is very serious and it's having a real impact on economic growth across the European continent, including in Britain, and it's the uncertainty that's causing the damage," he said.

But with official data showing the UK slipped into a double-dip recession in the first three months of the year, the Chancellor's economic policy - and austerity measures - are set to come under further pressure now that the eurozone narrowly avoided a recession.

Ministers blamed the recent contraction in the economy on the crisis on the eurozone.

The latest economic data helped calm Europe's main financial markets, which plummeted on Monday as investors' fears over a Greek exit from the single currency intensified.