High unemployment is hurting many eurozone economies

The 12-nation eurozone saw growth of just 0.3% in the three months to June, down from 0.5% the previous quarter, for an annual rate of 1.2%.

Germany was a key culprit, registering zero growth for the period.

But the performance was slightly better than feared, and Brussels said a weakening euro should help produce a turnaround by the end of the year.

"The first forecast (for the final three months of 2005) is 0.6%, supported by the lagged effects of favourable exchange rate developments and an improved international environment," said the European Commission.

Even so, the figures - a first estimate produced by the European Union's statistics arm, Eurostat - present a marked contrast with the EU's competitors.

The US economy grew 0.8% in the second quarter for a 3.6% annualised rate.

And Japan, whose GDP figure is announced on Friday, is expected to be comfortably ahead of the eurozone as well as domestic demand picks up pace.

Trouble at home

It is the domestic picture which has proved to be one of the eurozone's key weaknesses.

"There are risks from oil prices which continue to depress purchasing power of consumers," said Luigi Speranza from BNP Paribas.

"We consequently see very low levels of consumer confidence and that does not augur well for growth."

Among the economies in trouble is Germany, where 0% growth is partly due to high unemployment as well as high energy costs.

Two countries in the 12-nation eurozone actually saw their economies contract during the period: Greece, by 0.5%, and Finland by 1.2%.

In contrast, Italy - whose 0.5% contraction in the first three months of the year helped pull down growth during that period, recovered to grow 0.7%.