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Germany

Merkel Tells Germans 2009 Will be a Difficult Year

Chancellor Angela Merkel in her weekly podcast said Germans should expect "a year of challenges" in 2009, but said her government was working carefully on a stimulus package to help Germany weather the economic storm.

Angela Merkel

Angela Merkel wished her fellow Germans happy holidays, but added that next year could be tough

The chancellor said in the Saturday video message that the country had a lot to do in 2009, and that "we will need the strength and participation of everyone."

She said that her government aimed to "create a favorable situation" for Germany in the current difficult economic environment. Going into pep talk mode, Merkel added: "We know that we can only do this by working together. But I'm convinced that we can do it."

The German government has been discussing a second stimulus package that it says it will release in January. That follows an existing 23 billion euro ($32.5 billion) program that many critics at home and abroad have criticized as being too cautious.

Finance Minister Steinbrueck and Chancellor Merkel

Finance Minister Steinbrueck and Chancellor Merkel are softening their critical stances toward more economic stimulus

Merkel and her finance minister, Peer Steinbrueck, have been accused of not taking bold enough action in the face of the global financial meltdown by resisting stronger stimulus measures. Merkel and Steinbrueck have thus far ruled out tax cuts, although other conservative politicians in Germany have called for them.

Germany is not saddled with the levels of debt as are some other European countries, such as the UK, and the country's public finances are in fairly good shape. While Germany seemed to avoid much of the fallout from the global credit squeeze at the ouset, more recent signs point to Germany being anything but immune.

Business confidence has wilted to record low levels while manufacturing orders and industrial prices have tumbled. The world's biggest exporter has slipped into recession and could face its worst post-war contraction if it shrinks as much four percent in 2009, as leading economists have forecast.

Change of heart

The latest bad news have appeared to cause a change of heart in Berlin, with Steinbrueck's once staunch opposition to further stimulus packages softening.

A meeting of German government and industry heads

German government and industry heads got together this month in Berlin to discuss the financial and economic crisis

"I'm aware that we can't keep the door to the vault locked -- otherwise it'll be kicked down in panic by other people," Steinbrueck said in an interview in the Welt am Sonntag newspaper. "But what we want to avoid is having to roll out new stimulus measures on a monthly basis."

In her video message Saturday, Merkel said a second stimulus package must be "carefully prepared" to ensure that it saves or creates jobs. She added: "Our goal is to make Germany fitter, after the crisis, for 21st century challenges."

She and Steinbrueck have said additional money from the government should be invested in infrastructure projects such as roads, communication networks, education, and energy efficiency. The Leipziger Volkszeitung newspaper reported on Saturday, Dec. 20, that the new stimulus package would be about 20 billion euros and earmarked for investment spending.

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