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Germany

German government plans new economic summit

Unions are calling for 100 billion euros more in state aid, but politicians from Germany's governing coalition have so far ruled out a third stimulus package. But with elections due in September, that could change.

The chancellery beneath a cloudy sky

Stormy times at the chancellery

The German government is planning to hold another national economic summit in the chancellery next week, according to the Sueddeutsche Zeitung newspaper.

However, the paper said a government spokesman stressed that Wednesday's meeting was not about drawing up a third economic stimulus package but rather about assessing the impact of the two aid packages already implemented.

Chancellor Angela Merkel and Foreign Minister Frank-Walter Steinmeier, who head the government's two main coalition parties, the Christian Democrats and the Social Democrats respectively, want to use the Berlin meeting to assess the current economic situation in Germany and discuss potential future developments, the Sueddeutsche said. The gathering in the German capital was expected to draw about 40 top representatives from key business and industry sectors as well as trade unions.

German Finance Minister Peer Steinbrueck raising his finger while speaking

Steinbrueck has ruled out a third stimulus package


The results of the talks are to be included in the government's new growth forecast, which is to be released at the end of April. The last government forecast envisaged an economic decline of 2.25 percent, but Finance Minister Peer Steinbrueck said in March that due to the severe economic slump registered in the first quarter this forecast was probably too optimistic.

Industrial production fell by 2.9 percent in February and a recent slump in orders pointed to further weakness in output in the coming weeks, the Economy Ministry said. Unemployment in February was 7.4 percent, up 0.1 points from January but 0.2 points lower than in February 2008.

Analysts now fear that the German economy could shrink by up to 4.5 percent accompanied by rising unemployment figures exceeding a total of four million.

Unions demand third stimulus package

In view of the weak economic data, the head of German service sector union Verdi, Frank Bsirske, has urged the government to provide an additional 100 billion euros ($134 billion) in stimulus spending to prop up Europe's largest economy. However, Finance Minister Steinbrueck has rejected a third stimulus plan, saying it was necessary to first see the results of the first two.

Flags of German parties stuck in the lawn outside the Reichstag in Berlin

Economic issues are likely to dominate federal elections in September


The last economic summit in the chancellery took place just before Christmas. After that meeting the government decided to add another 50 billion to its planned 30 billion euro stimulus package over two years to support the ailing economy. Government circles have so far been reticent to raise the prospect of extra stimulus spending just yet, however, the issue is likely to dominate this year's campaigning for federal elections, especially since the ruling coalition of Christian Democrats and Social Democrats is looking to split after the September vote.

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