No Instant Cure for Germany′s Ailing Economy | Business| Economy and finance news from a German perspective | DW | 22.10.2002
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No Instant Cure for Germany's Ailing Economy

The seasonal appraisal of the German economy by the country's leading economic think-tanks was presented on Tuesday. It predicted more dark clouds and only brief periods of sunshine for the economic year ahead.


Intensive care: Hans Eichel and Wolfgang Clement debate the economy's condition

Germany's six leading economic research institutes presented their Autumn appraisal on the state of the country's economy in Berlin on Tuesday. The forecasts provide further bad news as Germany's current growth prospects show that previous estimates may have been too optimistic.

According to the combined report of the country's biggest think tanks, Germany's economic growth is currently a sickly 0.4 percent with a projected figure of growth for 2003 looking marginally better at 1.4 percent.

However, in comparison to the Spring forecasts that showed a rate of 0.9 percent at the time and an estimated 2.4 percent for 2003, Germany's ailing economy shows no sign of benefiting from any quick cure.

In addition to news regarding the slowing economy, research shows that a reduction in Germany's unemployment figures is also some way off.

German unemployment figures set to rise in 2003

According to data from the institutes' report in the daily business Handelsblatt newspaper, projections for 2003 expect the average figure for unemployment to be 9.6 percent. The figure for the current year is close to 9.5 percent.

The only good news nationally concerns the country's budget deficit. As the furore concerning the breaches of the European Union's Stability and Growth Pact continues, Germany, as one of the EU's main offenders, can take heart from research that suggests it can expect a marked reduction next year.

Current budget deficit of 3.2 percent to drop next year

The Autumn report records the budget deficit estimate at 3.2 percent of Germany's Gross Domestic Product (GDP) for the current year. It is predicted that the deficit will be reduced to 1.9 percent in 2003, according to research data in the Handelsblatt.

Regionally, there has been surprises. In the former East German states, the domestic product for 2001 stood at 0.1 percent but for the first time for years, industry growth has overtaken that in the western areas of Germany.

Bundeskanzler Gerhard Schröder und die Resultate der Hartz Kommission

Chancellor Schroeder hopes the new 'super ministry' can cure the economy.

With the unemployment rate of about 10 percent, almost non-existent growth and the rising cost of social programs, German Chancellor Gerhard Schroeder has placed immediate pressure on his newly created 'super-ministry' in charge of monitoring the workforce and the economy.

New 'super ministry' has difficult time ahead

Recently appointed ministry boss Wolfgang Clement has the task of appeasing furious industry chiefs over the admitted 10 billion euro ($9.8 billion) budget hole that has pushed the budget deficit up to the 3.2 percent level. He plans to squeeze more tax revenue out of individuals and businesses to help fill the country's huge spending gaps.

Although the news from the research institutes suggests a declining budget deficit to look forward to, the less than favourable aspects of the report mean that Clement and Finance Minister Hans Eichel have added burdens to consider on top of their already mammoth tasks.

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