Leading economic institutes called on German Chancellor Angela Merkel's government on Thursday, Oct. 18, to step up reform and warned that Europe's biggest economy faced slowing growth next year.
The institutes told the government in their autumn report
presented in Berlin on Thursday that German growth will slip back to
2.2 percent in 2008 from 2.6 percent this year, with a soaring euro,
the global credit crunch and surging oil prices undercutting the
nation's expansion rate.
Some economists are more pessimistic
and believe Germany will be lucky to reach a growth rate next year of 2
percent. The International Monetary Fund said this week it expects
German growth will slip to 2 percent next year from 2.4 percent for
2007.
Thursday's report was drawn up by four leading German
economic institutes in conjunction with research groups from other
European nations.
Criticism of ineffective reforms
Coming in the wake of criticism by German business about the failure
of Angela Merkel's government coalition to press on with economic
reform, the institutes said: "Much more additional work needs to be
done rather than roll back the reforms so far discussed.
"The labor market reform course of the last few years has not progressed," the institutes added.
The US housing market crisis had a knock-on effect
The report comes as economists attempt to size up the ramifications
of the shakeout in global share prices in August following the credit
crunch triggered by the US housing market crisis.
At the same time, the institutes joined a growing list of forecasters who have revised down their growth outlook for Germany.
High
oil prices, the strong euro and financial market uncertainty will
"dampen growth," Roland Döhrn, an economist with the Essen-based
Institute for Scientific Research (RWI), told a press conference
following the release of the report.
In their last report in the
spring, the institutes projected a growth rate for Germany of 2.4
percent in both 2007 and 2008, with strong export demand powering the
nation's economic performance.
Export growth likely to decline
Since then, however, the euro has climbed to an all-time high of
$1.43 as fears have set in about the US economic outlook, consequently
fuelling concerns about the prospects for Germany's key export machine.
The
institutes predict German export growth will decline to 3 percent in
2008 from 3.5 percent this year, with stronger private consumption
emerging as a key pillar of growth.
The institutes are also forecasting private consumption to grow by 1.5 percent next year compared to just 0.2 percent in 2007.
The
release of the institutes' report is expected to lead to the German
government also scaling back its growth projections for the nation.
Germany
emerged last year from a protracted period of stagnation, with a recent
solid growth rate helping to ease the nation's high unemployment.
Larger reduction in unemployment that expected
German unemployment dropped in September
The number of people out of work in Germany fell more than expected
in September, data released last month showed, with employers
continuing to hire on the back of the economic upswing and years of
wage restraint.
The institutes expect unemployment to continue
falling to average 7.9 percent in 2008 compared to 8.7 percent in 2007.
Germany's jobless rate stood at 10.3 percent last year.
Apart
from the RWI, the German institutes involved in drawing up the report
included the Kiel Institute for the World Economy (IfW), Halle
Institute for Economic Research (IWH) and the Munich- based Ifo
Institute for Economic Research.
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