Merkel still optimistic about 2011 growth

Merkel still optimistic about 2011 growth
Photo: DPA
The German government could raise its official growth forecast after Chancellor Angela Merkel indicated on Friday Europe's biggest economy would expand faster than expected this year.

“Growth this year should be closer to three percent than 2.5 percent,” she told a trade association in Berlin, despite mounting concern that Germany, which is heavily dependent on exports, could be facing a slowdown.

Merkel’s comments suggest that the government – which has so far been pencilling in gross domestic product (GDP) growth of 2.6 percent – may raise its official 2011 forecast when it is announced at the end of October.

Indeed, economists and business leaders have all been much more optimistic all summer, suggesting growth could actually come out at 3.0 percent or even higher.

But to ensure continued growth, the stabilization of the euro will remain “the central task” for the government, Merkel said.

“The euro provides for more economic growth, it creates jobs and with it also secures prosperity in Germany,” she said. “We need to move closer together and (create) more shared responsibility among euro member states.”

But the ongoing eurozone debt crisis could pour cold water on the German government’s optimism, with the European Central Bank and the EU Commission both downgrading their economic forecasts for the single currency area recently.

And German growth, too, failed to meet expectations in the second quarter, coming out at a meagre 0.1 percent.

One leading economic think tank, the IfW in Kiel, even suggested Germany was “on the edge of a recession,” predicting growth would slow from an anticipated 2.8 percent this year to just 0.8 percent next year.

AFP/DAPD/DPA/The Local/emh

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