AFP reported that Germany and France unexpectedly emerged from recession while the 16 nation eurozone economy shrank by just 0.1% in the second quarter in new signs that a recovery is taking shape.

A day after the Federal Reserve said the recession hit US economy was stabilizing, official initial estimates showed that Germany and France both achieved growth of 0.3% in the second quarter of 2009.

The news was particularly welcome for German Chancellor Ms Angela Merkel ahead of polls next month as Europe’s biggest economy had not seen positive growth since the first quarter of 2008. Analysts had forecast a 0.2% drop. The figures from France were equally unexpected as the national statistics office INSEE had forecast a 0.6% contraction.

Ms Christine Lagarde finance minister of France said that "We have come back to positive growth." She warned the outlook for unemployment would remain difficult, with her ministry saying private sector job losses could reach 591,000 in 2009.

Mr Juergen Stark chief economist of European Central Bank said that growth in the eurozone could return sooner than expected. He added that "What we are seeing is based primarily on stimulus measure by the governments and the re stocking of warehouses. Seen in that light, we cannot count on a durable return to a growth course."

(Sourced from AFP)