European economic growth picked up in the first quarter, handily outstripping analyst expectations, led by Germany and France and leaving Spain and Italy in the dust. Germany is at the forefront of this move, which saw growth quintuple for Europe's largest economy from the prior quarter thanks to streamlined production and higher emerging-markets demand. Take that, U.S. credit crunch! So, what else lies in store for the economy that’s now basking in its third soft landing since 1960? Read on to find out.

European economic growth accelerated more than economists forecast in the first three months of 2008 as stronger expansions in Germany and France masked slowdowns in Spain and Italy.

Gross domestic product in the euro area increased 0.7 percent from the previous three months, when it rose 0.4 percent, the European Union's statistics office in Luxembourg said today. The pace exceeded the 0.5 percent median of 32 estimates in a Bloomberg News survey and the 0.1 percent growth rate in the U.S.

Growth quickened to the fastest pace in 12 years in Germany and was higher than analysts expected in France, providing strength at the core of the euro-area economy as Spain suffered its weakest expansion in almost eight years. That justifies the decision of the European Central Bank to hold off cutting interest rates for now as it tries to conquer inflation.

"After the strong data in the first quarter there is definitely no room for the ECB to cut rates," said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt.

The ECB has signaled no rush to cut rates having kept its benchmark at a six-year high of 4 percent since June even as the U.S. Federal Reserve and Bank of England lowered borrowing costs. Figures published today showed euro-area inflation eased to 3.3 percent in April from a 16-year high of 3.6 percent in March, still well above the ECB's 2 percent ceiling.

Continue reading on Bloomberg.com

Next article » Hot And Hot: Brazil

Previous article « Knight: HSBC’s Worst Nightmare?