Europe Economy

'Europe heading for catastrophe' despite German growth

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The euro zone's largest economy Germany might be powering ahead in terms of growth but the euro zone as a whole is heading towards a "catastrophe," one economist warned on Friday.

Growth data for Germany released on Friday showed the economy had grown by 0.3 percent since the last quarter, marking a 1.1 percent increase year-on-year. In addition, the business climate index from German think-tank Ifo – which measures business confidence among 7,000 domestic firms – climbed to 109.3 in November, surpassing forecasts and October's 107.4 reading.

The data followed euro zone business activity for November which indicated a growing divergence between Germany and the rest of the euro zone.

Both the German manufacturing and the services sectors performed better than expected while data for France, the euro zone's second largest economy, showed a contraction.

(Read more: Is France heading for a new recession?)

The PMI data marked another point of disappointment for the euro zone, which has already experienced a growth slowdown in the third quarter.

The single currency region's GDP grew by just 0.1 percent in the third quarter, marking a slowdown from an expansion of 0.3 percent in the second quarter.

(Read more: Why euro zoneslowdownshould worry the world)

"It's pretty frightful," Roger Nightingale, economist at RDN Associates, said on the deterioration in the data. "Nothing has changed in the last five or six years, they're in a terrible mess and they're heading for, I'd say, a catastrophe."

"[In the crisis] the Americans hit a wall and went into recession and the Europeans, full of schadenfreude, were so glad the Americans got their comeuppance. They said 'it's not going to affect us' and they were so wrong and it hurt them more," Nightingale said.

"But while the Americans put it right and recovered to some extent, the Europeans have not recovered and have not put it right," he warned.

In the face of slowing euro zone growth and deflationary pressures, the European Central Bank (ECB) cut interest rates to a record low of 0.25 percent in November but analysts have warned it might not be enough to promote spending and growth.

(Read more: ECB cuts rates to new low of 0.25%, euro sinks)

For his part, Nightingale said Draghi was "not doing a good job for the weaker members of the community... In fact, he's not doing a good job as far as the community is concerned and if you asked the people, rather than governments, how he was doing they'd be even more dismissive."

Uncertainty holding back private investment in Germany

Dangers from Germany?

One of Germany's top economic advisors also told CNBC on Friday that the euro zone's primary growth driver, Germany, faced risks to its economy and political stability.

Volker Wieland, a member of the German Council of Economic Experts -- the council of five economic wise men who advise German Chancellor Angela Merkel -- told CNBC that despite a pick-up in German growth, political and economic risks remained.

"Like most observers, we forecast that growth will pick up next year and behind that is a view that private investment and private consumption has been relatively low and should rise further - but [there's still] a lot of uncertainty."

(Read more: German business: Europe should copy, not criticize surplus)

He warned that uncertainty over government policies on income taxes and energy were "holding back investment so far."

International observers are watching Germany's slow progress in forming a coalition government since Merkel's party failed to gain an outright majority in September's elections. Merkel's conservative Christian Democratic party islooking to form a somewhat awkward alliance with its socialist rivals, the SPD.

Wieland warned that such an alliance could bring about negative economic changes. "They're discussing measures which could undo some great reforms of the past, like labor market and pension system reforms. It's very important that these successes are not rolled back."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

Follow us on Twitter: @CNBCWorld

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