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Germany

Merkel Calls Economic Summit to Evaluate Options for 2009

Chancellor Merkel welcomed German leaders to the Chancellery for talks to devise a new approach to overcoming the economic crisis. Berlin is also reportedly working on a second rescue plan in case the crisis worsens.

Merkel holding her hands in the air at a party conference

Merkel is looking for a new, concerted approach to dealing with the economic crisis

"I see this meeting as the starting point for a very close cooperation with all the players in our society," Merkel said Sunday, Dec. 14, in Berlin as the meeting began, adding that she would continue to ask the 32 experts invited to the talks to consult with her on a regular basis.

Ahead of the meeting, she told the Sunday newspaper Bild am Sonntag she wanted "to study the possibilities for reacting quickly to a worsening of the crisis."

Ongoing talks to be held over the coming weeks would include "great concentration on a concerted approach," to getting through the current crisis, she said, adding that Germany as a "strong country" that could withstand the ongoing economic turmoil.

A person holding binoculars

Germans leaders are hoping to get a glimpse of what 2009 could bring

"It's about reaching a common evaluation of the perspectives for 2009 with social, business and banking partners," Merkel told the paper of the meeting on Sunday, Dec. 14. "I am entirely convinced that we, the Germans, are going to overcome this challenge."

Government officials have sought to play down expectations from the talks, saying they were intended to form a consensus on how the economy might develop in the coming year.

At the most there could be a "minimal agreement" on which measures might best be suited to prime the economy and which might not be, deputy government spokesman Thomas Steg said on Friday.

Economic experts called on German leaders to take a measures response to the crisis.

"I would get the flint ready without shooting off all the powder right away," Hans-Werner Sinn, head of the Ifo Institute for Economic Research told Focus magazine.

The seriousness of the situation

But there has also been criticism of Germany's action on the economic stage. Nobel Economics Prize laureate Paul Krugman said Merkel and Finance Minster Peer Steinbrueck were unaware of the seriousness of the economic crisis.

A line chart with the line falling sharply on a background of backlit construction site

Some in Germany fear a steep recession in 2009

He said they were wasting precious time for Germany and Europe. In the interview with German newsweekly Der Spiegel, he went on to say that the two Germans may have lacked the mental flexibility to understand the type of situation they are trying to control.

Quoting from the draft of an economic report set for publication in early 2009, the newsmagazine, in a separate article, said government experts predict a two-percent contraction in the German economy next year.

"The government will watch economic developments closely," the magazine quoted from the draft. "If there is an intensification of the international crisis, it will use its room for maneuver to take further stabilizing measures."

Economy Minister Michael Glos, however, dismissed the numbers in the Spiegel story telling the Bild am Sonntag newspaper, "Such numbers are pure speculation."

Second rescue plan in January?

A flotation device on the bank of the Spree River with the German parliament in the background

Is a second rescue package already in the works?

Speculation or not, rumors circulated in Berlin that the government was working on a new, 30-billion-euro ($40-billion) economic support package -- slightly less than the program of tax relief and construction incentives already in place, according to Wirtshaftswoche.

Made up of income tax reductions, cuts to mandatory health insurance contributions, infrastructure investments and tax vouchers for the less well-off, the plan would be made public in January after US President-elect Barack Obama takes office.

Merkel's economic advisor Jens Weidmann was in talks with party leaders and Glos to draw up the program, according to Wirtshaftswoche.

Merkel has been under pressure to introduce new measures to help Germany dig its way out of a recession that is expected to see Europe's largest economy shrink by 0.8 percent next year.

A survey conducted Friday for national broadcaster ARD showed four out of five Germans supported tax cuts. Some 75 percent felt the economy was in bad shape, but nearly two-thirds described their own financial situation as good.

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