Europe News

Euro zone growth stagnates, Germany contracts

Gavin Hellier | Getty Images

Euro zone economic growth was stagnant in the second quarter, missing market expectations, official data showed.

Gross domestic product in the region was flat according to the European Union's Statistics Office, falling below analysts' expectations. A poll by Reuters showed they expected 0.1 percent growth.

The pressure is now on for President of the European Central Bank, Mario Draghi, to take further action to boost liquidity, analysts have said, as Italy has fallen back into recession and Germany's economy contracted.

Read MoreEuro zone unemployment stuck, recovery stalls

"Given the sheer volume of disappointing economic figures emerging from the bloc, it's clear June's measures alone won't be enough to stimulate a self-sustaining recovery," Nancy Curtin from Close Brothers Asset Management said.

French President Francois Hollande and German Chancellor Angela Merkel
Sean Gallup | Getty Images

Spain and the Netherlands both posted strong growth, with the Spanish economy seeing a 0.6 percent expansion. The Dutch economy grew a preliminary 0.5 percent driven by higher exports and investments.

But euro zone analyst at the Economist Intelligence Unit, Aengus Collins, said overall the numbers were "dreadful".

"It is close to impossible to craft a strong-growth narrative for the single-currency area when Germany and Italy are contracting and France is stagnating," he said.

Earlier on Thursday, data showed Germany's economy lost momentum, contracting for the first time in over a year.

The shock 0.2 percent contraction in Germany was due to the negative balance of imports and exports, along with construction, which Germany's statistics agency said had fallen markedly. Foreign trade and investment was also weak.

Germany, often referred to as Europe's growth engine showed a marked slowdown from the January to March period when the economy grew strongly. The nation's statistics office put the solid first quarter, when the economy grew 0.7 percent, down to the extremely mild weather over the period.

Read MoreItaly unexpectedly slides back into recession

Meanwhile, the French economy failed to grow during the second quarter of this year after stalling in the first, missing analyst expectations, data from the French national statistics bureau Insee showed.

'Nothing has changed' in France: Pro
'Nothing has changed' in France: Pro

The figures make it unlikely France will post growth of 1 percent for 2014.

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"It means probably growth for this year will be 0.5 percent, but even for 0.5(percent) we need a rebound in the third and fourth quarter," Philippe Waechter, head of economic research at Natixis Asset Management told CNBC.

Analysts polled by Reuters had forecast growth of 0.1 percent in the three months to June.

Read MoreEuro zone business activity rebounds, France lags

The French economy has fluctuated between contractions and slight growth every quarter over the last two years, scuttling President Francois Hollande's pledge to get unemployment to start falling.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

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