BRUSSELS: Europe’s economy is proving surprisingly resilient against soaring energy and food prices, data showed on Friday, as tourism boosted France and Spain but export powerhouse Germany stalled, keeping recession fears alive.

The EU agency Eurostat said gross domestic product in the 19-country eurozone grew by 0.7pc in the second quarter, far stronger than expected by analysts. The EU as whole grew by 0.6pc.

The war in Ukraine has seen the price of natural gas and grocery items skyrocket, and Eurostat’s data also showed that inflation in the single-currency area hit yet another new record of 8.9pc in July.

Europe’s industrial powerhouse Germany continued to be the worst affected by the war, which added to the country’s woes from the continued Covid restrictions in China, a crucial export market.

Stagnant German growth in the second quarter has led analysts across the board to predict a recession that would spill over to the continent as a whole.

Russia has sharply reduced its gas flows to Germany, raising the fear that reserves will be very low this winter and force some level of rationing that would be devastating for the economy.

The International Monetary Fund has warned that Germany, which serves as the engine of the wider European economy, is the most at risk against the war in Ukraine.

Countries reliant on tourism showed better-than-expected resilience, with growth in France and Spain gaining strength as tourists took advantage of unrestricted travel to the world’s top destinations.

The economies of France and Spain expanded from the previous quarters by 0.5pc and 1.1pc, respectively.

Nevertheless, analysts warned that the tourism boost would be short-lived and said all countries faced a huge challenge to sustain growth in the second half of the year.

“The stronger-than-expected GDP data... do not alter the fact that a deepening energy crisis, soaring inflation and rising interest rates are likely to push the region into recession later this year,” said Andrew Kenningham, economist at Capital Economics.

Italy, a major source of concern for analysts, also defied expectations by growing one per cent in the second quarter.

Italy is heavily indebted and fears of a political crisis are rife after the announced departure of Prime Minister Mario Draghi — who is seen as a steady hand by the financial markets.

Published in Dawn, July 30th, 2022