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Germany

German economy on course for strongest growth in decades

Five leading think tanks have predicted that the German economy will grow by 3.5 percent in 2010, up from a more modest prediction of 1.5 percent earlier this year. Unemployment is expected to drop below three million.

The back side of a German 1 euro coin showing the eagle

The German economy is surging ahead

Germany's national economy will continue its recovery despite a slowing global economy, leading economic forecasters said Thursday. Analysts predicted growth of 3.5 percent this year and two percent in 2011.

In their twice-yearly report, Germany's five leading economic think tanks also predicted that unemployment will get better. The number of people without a job is expected to fall below three million next year, the lowest level since 1992.

The report also included a revised their prediction from earlier this year, when a more modest 1.5 percent expansion was anticipated for 2010. A sharp increase in exports in the first half of the year fuelled the rebound from the deepest recession since World War II.

German Chancellor Angela Merkel welcomed the institutes' higher growth forecasts along with what she said were their "very optimistic assumptions about the labour market."

Risk from abroad

A container ship in the port city of Hamburg

Exports helped the German economy rebound quickly

The report was welcome news after a year in which the German economy shrank by 4.7 percent in 2009.

However, the institutes warned that growth is expected to slow again in 2011 as the US economy slows and governments around the world begin to roll back stimulus programs.

"The upturn is stable," said Kai Carstensen from the Munich-based Ifo institute, one of the think tanks involved in the report. "In Germany, it looks good. The risks are above all overseas."

In Germany, Berlin plans to bring the country's finances back into shape by cutting back on government spending. The move could lead to the deficit falling below three percent of gross domestic product, the ceiling set out for Euopean Union countries that use the euro currency.

Author: Martin Kuebler/Sarah Harman (AP/dpa)
Editor: Chuck Penfold

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