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Business & Money
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Economy facing temporary slowdown

Published: 7 Dec 12 09:30 CET | Print version
Online: http://www.thelocal.de/money/20121207-46623.html

The German economy, Europe's biggest, will not be able to escape the crisis and may even see a technical recession early next year, but is well placed to rebound strongly, the Bundesbank said Friday.

The German central bank, in its latest updated twice-yearly forecasts, said there were "indications that economic activity may actually fall in the final quarter of 2012 and the first quarter of 2013."

Recession is technically defined as two consecutive quarters of negative growth and many of Germany's eurozone neighbours have been pushed into recession, in some cases deep, by the region's long-running debt crisis.

Although Germany has managed to hold up to the crisis fairly well, growth has been slowing here as well since the beginning of the year. After expanding by 0.5 percent in the first quarter of 2012, gross domestic product (GDP) grew by just 0.3 percent in the second quarter and a mere 0.2 percent in the third quarter.

"The cyclical outlook for the German economy has dimmed," the Bundesbank wrote in its December monthly report.

"However, there are sound reasons to believe that Germany will soon return to a growth path. The sound underlying health of the German economy suggests that it will overcome the temporary lull without major damage to the labour market, in particular," it said.

Taking this year and next year as a whole, GDP would expand by 0.7 percent in 2012 and then by just 0.4 percent in 2013, the Bundesbank predicted.

That represents a marked downward revision from the central bank's previous forecasts in June, when it had been pencilling in growth of 1.0 percent for 2012 and 1.6 percent for 2013. It also gave its first estimation for growth in 2014, when the economy is forecast to expand by 1.9 percent.

The Bundesbank cautioned that its projections were "characterized by a high degree of uncertainty.

"It is quite conceivable that the euro area will recover sooner and the world economy will accelerate faster than assumed in this projection," it said. "Downside risks nonetheless predominate."

"Should global economic growth remain below expectations or the sovereign debt crisis escalate further in some countries, it is probable that the German economy may follow a weaker course than the one assumed in the baseline scenario," it said.

The day before, the European Central Bank unveiled its own set of -- rather gloomy -- economic forecasts for all 17 countries that share the euro.

In its regular quarterly staff economic projections, the ECB forecast that the eurozone economy will contract both this year and next year and only return to growth in 2014.

ECB chief Mario Draghi argued that the central bank's policy of low interest rates -- it held them at their historical low of 0.75 percent on Thursday -- would help fuel recovery.

The Bundesbank, too, believed the "exceptionally favourable financing conditions" would benefit businesses' investment plans.

Turning to unemployment, the Bundesbank said it expected the labour market to "come through the economic slowdown in good shape."

The jobless rate, projected to reach a low of 6.8 percent this year, would edge up to 7.2 percent in 2013 and then fall back to 7.0 percent in 2014, it said.

Inflation, too, would remain contained, easing from an anticipated 2.1 percent year this to 1.5 percent next year and 1.6 percent in the following year.

The ECB defines price stability as inflation rates just below 2.0 percent.

AFP/mry

What do you think? Leave your comment below.


Your comments about this article:

16:30 December 7, 2012 by smart2012
Germany.... WAS.... booming :-)

Thanks Verkel!
00:00 December 8, 2012 by IchBinKönig
The healthiest horse in the glue factory. Nice.
11:30 December 8, 2012 by matchstickmann
The next train for Greece will leave in one hour!
11:58 December 8, 2012 by smart2012
Matchstickmann, as Europe is one and Verkel was leading European agenda for the last 4 years, with the results of bringing all Europe in crap, including Germany, I feel more than free to comment on Verkel wherever I live in Europe
13:26 December 8, 2012 by Berlin fuer alles
@matchstickmann

If living in Germany I would happily hop on that train to Greece whilst you languish in your self inflected hell along with Dr. Merkyl and Mr. Hyde. The only problem is she has inflicted pain on the rest of Europe also and is a living testimony to the EuroMark not working. Not even working for Germany eventually but until your own misfortune blossoms you will not realise this. Just as the Germans didn't realise until 1945 under Mr. AH.
13:37 December 8, 2012 by nstaubach
@loosers:

there are people who believe in doing something creative and therefore they are also criticized e.g. Dr. Merkel

then there are people who sit idle and all they can do is complain, criticize and spread hatred e.g. smart2012 and Berlin fuer alles.

i'm sure you two also complain to your parents, since they are the ones responsible to produce two idiots like you?
14:01 December 8, 2012 by Berlin fuer alles
@nstabach.

The last time people were critised for exercising their right to free speech in Germany resulted in another creative leader wrecking havoc on Europe to Germany's resultant ruin. Be careful what you wish for idiot.
14:22 December 8, 2012 by nstaubach
idiot...corrupt Greek Politicians were living a lavish life beyond their means and screwing the tax money of IDIOTS like you.

The biggest mistake was to allow such a corrupt country in EU and now we have to live with it, because still some morons like you believe what those corrupt politicians were doing was right and now someone is trying to fix your mess is a devil for you.....now stop complaining got out of your comfort zone work hard and pay for the lavishing lifestyle of your Ministers....and go get some life IDIOT!
14:30 December 8, 2012 by Berlin fuer alles
@nstauback. Don't make assumptions.

1. I am not Greek.

2. I do not live in Greece

3. German and other EU politicians knew what Greece was like when they paved the way for them to join the EU.

4. Germany and other EU countries are not without corruption either. Ask Dr. Merkyl and Mr. Hyde and her banking buddies all about that. Yes she is showing creativity. But it is not the creativity that is good for the citizens of the EU including your good self. IDIOT
14:35 December 8, 2012 by nstaubach
@BfA

see now you are talking....and to be honest criticism with a possible suggestion or solution is always appreciated in Germany. What i have noticed from all your posts for the last six months is just complaining, criticizing and spreading hatred. What lacks is a creative though for a long-term solution...i hope you get it...IDIOT!
14:48 December 8, 2012 by Berlin fuer alles
If you have been stalking me for 6 months you will have noticed that my solution is to change leadership. As long as Dr. Merkyl and Mr. Hyde gets her way for the banks Germany and the rest of the Eurozone will suffer and growth will be stiffled. Yes, I am complainng and critising. No, I am not spreading hatred. I dislike Merkyl and her policies of seeming sweet at home in Germany and evil outside Germany. Get rid of Merkly. Burn the bond holders of the toxic banks and let the tax payer off the hook. Allow growth instead of imposing austerity. There is my solution. Look at Iceland. They burnt their toxic bank bond holders and devalued their own currnecy. Merkyl could not meddle in their affairs and they are much the happier and better off for it.
14:59 December 8, 2012 by nstaubach
It sounds reasonable....now lets look at the manifesto of other Political Parties who will be challenging Dr. Merkel and FDP next year... e.g. SPD, Greens, Links....unfortunately your thoughts doesn't match with any of them and for that sake throughout Europe no political party will agree with your thoughts........so time for plan B. As a free citizen you have the right to freedom of speech and freedom of forming a political party with your views for a better EU for our next generation. I'm sure if you are right you will be voted to power. As as alternate may be if you can tell your origin, i might be able to understand you better. Peace!
15:00 December 8, 2012 by IchBinKönig
Don't waste your time, Both of the Idiots, or more likely, singular IDIOT; Bfa and Smart2012 just don't get it...

The reason Germany was in a boom was because of a Bubble of Credit created by the invention of the Euro Zone. The Euro Zone received a boost in credit not because it deserved it, but because it married into a relationship with others who had better credit., every countries credit was tied to the German's credit, they lived high on the hog, until that credit ran out.

Now that the money has run out, its Merkels fault? A lot of things can be Merkels fault, but the Money running out was simply inevitable. But these 2 (or more probably 1) IDIOTS just will not be able to fit the concept through their thin skin and thick skulls.
15:40 December 8, 2012 by smart2012
Oh, it is so nice to learn from close minded clever guys..

Ibk is a anti European clear. He wants to destroy Europe. Very smart

Nstaubach is not enabling people to comment on Verkel, after all results show she brought Europe to a disaster. Very smart as well.

Me (Canadian) and bfa cannot comment or criticize, but ibk and nst can swear at us... Ah ah ah, low educated and populistic people reading Bild are destroying Europe and this world
19:44 December 8, 2012 by Berlin fuer alles
There seems to be one common denominator here. We agree that the situation in Europe cannot go on as it is. Merkyl has created a nice credit slavery system for her banking buddies as well as bailing them out by German and other EU tax money. Either go back to the old days of individual soverign states or do the job properly and relinquish some power to a central federal government. Neither suits Dr. Merkyl and Mr. Hyde and her banking buddies. I am just glad my country (UK) stayed out of the euro. Either create a fair and proper euro institution shared by all or lets all go our seperate ways again. Merkyl knows full well the latter is not an option for her, Germany or her banking buddies but continues to drag her heals on the former solution.
14:15 December 9, 2012 by chris berlin
@ berlin für alles and smart2012 (maybe you are one and the same person the way you write):

Merkel is still one of the most popular politicians in Europe. There is some anti-Merkel propaganda but again and again I meet people from all kinds of EU-countries talking about Merkel in the best ways. I also met her once due to my job and she was such a humbel and not vain person trying to do her best. There are so few politicians like her. That is why she is so popular.

I do not agree with her conservative policies but she is not hated and she is by far not destroying Europe. I still do not get it how you are so totally irrationally demonizing Merkel. This is so far out of context. You must have some issues that you hate a simple politicians so much.

And btw: The UK goes its seperate way with its neoliberal fincance system : It supports conditions so that billions of Greek Euros have been moved there. This destroys the EU and this is hypocritical. The UK is a bank state.
04:49 December 12, 2012 by honeybeee
Guys , stop arguing ! Let all EU people form friendship and strive for a better EU, because solidarity is strenth, Let Dr. Merkel is going on her way to lead a bette Germany and even a better Euro Zone which can go further and healthy . Now I just find women has much more resillient and patient to lead than men , like our great country or even in one corporate , women leaders perform and show their resillient everywhere. As I know in Schaeffler Ag, they recent nominate two women managers in Hungary branch to handle the main post and under honoured leadership of Madam Maria Schaeffler , they will give women more oppotunity than others and believe they have enough capability to keep the done well and even exceed their men counterpart. So let us all suport Dr. Merkel and her great humble leadership go further and suceed .
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