Cassandra retires

Other economic forecasters were still optimistic as the global crisis took hold in early 2009. But Norbert Walter, Deutsche Bank's chief economist, delivered a typically pessimistic and unpopular prognosis: Germany's economy would contract by five percent. And, so it came: Germany's worst post-war contraction now stands officially at 4.9 percent as the year draws to a close.

The outspoken 65-year-old professor of economics, with a bent for defying critics - peers and politicians alike - endorses recovery forecasts for 2010 and 2011 of one to two percent. But, he's still cautious.

“The thing is still running on medication," he warned recently, referring to the massive injection of monies into the sluggish global economy by governments and central banks throughout 2009. "We shouldn't assume that the drugs will be prescribed for ever."

Deutsche Bank's public face for two decades

For 22 years, Walter has led the economic analysis section of Germany's largest commercial bank. His successor from January will be Thomas Mayer, 55, previously the London-based chief economist for Europe in the bank's Global Markets division.

Walter, born in the Franconia region of the southern state of Bavaria as the oldest of five children, made his mark for diverting from mainstream peer opinion during the 1970s at the Kiel Institute for World Economics in northern Germany.

"In the first prognosis for which I was responsible I predicted an economic decline of four percent for 1975, while my colleagues all predicted zero percent,” Walter told the German news agency dpa in a recent interview.

This led the institute's director, economist Herbert Giersch, to dub Walter a "prophet of doom."

More innovation needed

His reputation for Klartext, the German word for plain speaking, prompted Walter to exhort a succession of governments, led first by the Christian Democrat Chancellor Helmut Kohl and then his Social Democrat successor, Gerhard Schroeder, to adopt more market competition and innovation. Walter's call for deregulation culminated after German reunification in 1990, when he stated that the country had missed a historic chance to rid itself of encrusted overregulation and what he saw as employment perks, views that put him offside with labor unions.

Walter understands public frustration

A few weeks ago, Walter dismissed calls for punitive taxes on manager bonuses, saying this was not a sensible option. At the same time, though, he added that he understood the public's frustration over recent excesses.

"More sensible would be delaying the payment of bonuses," Walter said. The timeframes used by banks to calculate bonuses should be lengthened, so that success is not measured on only short-term gains.

In September he raised eyebrows before the G20 summit in Pittsburgh by suggesting that Britain would be best placed to promote new regulation of the investment banking sectors. Paris and Berlin should back London, Walter argued, because the City had grasped that lax regulation had contributed to the crisis.

Walter's forecast for the German labor market is significantly more pessimistic. Hit by a slump in exports branded “made in Germany,” he predicts that unemployment will rise to 4.5 million in 2010. Most other researchers forecast four million registered jobless.

Halve national deficit, urges Walter

In a recent interview with the newspaper Welt am Sonntag, Walter said that Germany must halve its national debt, which is currently approaching five percent of gross domestic product. Halving it should take precedence over other issues on the political agenda, Walter said.

In retirement, Walter told dpa he plans to open a consultancy with his two daughters.

"I actually wanted to wind down from an 80 to a 40-hour week. For the first six months, that's unrealistic.” He is also planning to finish writing a book..

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Editor: Susan Houlton