An abrupt slowdown in Europe’s biggest economy saw Germany’s growth stagnate in the final quarter of 2005, after a robust expansion of 0.6 per cent in the previous three months, official figures showed.

The disappointing sudden standstill in Germany contributed to a halving in fourth- quarter GDP growth across the eurozone to a modest pace of only 0.3 per cent.

However, despite the bad news economists, investors and eurozone politicians all expressed confidence that both Germany and the eurozone would still enjoy a renewed acceleration in the opening months of this year.

A survey of 25,000 German companies by the country’s chamber of industry and commerce (DIHK) reported that the outlook for corporate investment was at its strongest for 11 years, while expectations for exports surged to a six-year high.

The mood among services firms also brightened, with companies’ spirits buoyed by expectation of a boost for consumer spending from this year’s World Cup.

In a further counter to the gloomy GDP data, the closely-watched ZEW survey of sentiment among Germany’s investors dipped only slightly in February, with a headline confidence index of 69.8 — only a little below the two-year high of 70.0 set in January.

The ZEW economic think-tank said the results showed that optimism in German financial markets had “stabilised at a high level”, while the investment climate remained positive.

David Brown, an economist with Bear Stearns, backed the view of many other analysts yesterday that most of the ingredients for a strong revival in German economic activity this year remained in place.

“Business confidence is still operating at a high level, consumer optimism is building as the jobless rate trends lower, and real activity levels are continuing to pick up,” he said.

For now, yesterday’s official figures continued to show scant sign of any resurgence in German consumers’ willingness to spend. The country’s statistics office noted that domestic demand had “contributed little” to the economy’s fourth-quarter showing.

It was unclear to what extent consumer spending may have been depressed at the end of last year by political uncertainties surrounding the creation of Germany’s “grand coalition” Government of left and right under Frau Merkel.

In the meantime, fourth-quarter growth relied instead on what was described as “highly dynamic” net trade, and on strong investment spending.

European finance ministers, meeting in Brussels, sought to brush aside the lacklustre economic news and strike an optimistic tone over prospects for this year.

Karl-Heinz Grasser, Austria’s Finance Minister, whose country presently holds the EU presidency, said that data showing that government tax revenues had risen could prove to be a sign that the GDP data were understating the true level of growth and that they might yet be revised upwards. “We have good reason to be optimistic,” he said.

Jean-Claude Juncker, the Luxembourg Prime Minister, who chaired Monday’s meeting of eurozone ministers, said he was still banking on an acceleration in growth this year, although he highlighted lingering concern over energy prices.

GROWING PAINS