Germany plunges into deep recession
Published on: 22 Apr 2009 17:09 CET
Finance Minister Peer Steinbrück said the global slowdown "has meant that we have had a slump in the economy... in the first quarter of, I believe, 3.3 percent."
Official figures for the first quarter of this year are not published until May 15.
Given the appalling figures both in the fourth quarter of 2008 and the first quarter of 2009, Steinbrück said the economy could slump by as much as five percent for the whole of this year.
"A five before the decimal point is not unlikely," said the minister.
Steinbrück's comments follow the latest projections by the International Monetary Fund showing that Germany's economy would shrink by 5.6 percent - a forecast officials said was "not implausible."
Berlin will unveil new economic projections for 2009 on April 29 and has already indicated it will sharply revise down its current estimate of -2.25 percent. Even that would be the worst recession in modern German history.
"The downward trend has, as before, not slowed down," Steinbrück said.
Speaking at the same news conference following a crunch economic summit with Chancellor Angela Merkel and union and business officials, Economy Minister Karl-Theodor zu Guttenberg said: "I think we were all agreed around the table that we have a very difficult year ahead of us."
Merkel hosted the summit at the Chancellery on Wednesday, meeting with business and trade union leaders to discuss getting Europe’s largest economy back on track.
Some 40 industry players analysed the effects of Germany’s two economic stimulus packages – worth a combined €80 billion – which are just now beginning to take effect on the country. However, there are no plans to consider a third such package.
"It was very clear today... that we should not be talking about a third stimulus programme, that the measures are working, that in some areas they should be further developed," Merkel told reporters after the summit. "The second stimulus package gave us the instruments to work with, and therefore we will let these have an effect first."
The high-profile meeting in Berlin was also intended to improve Germany’s response to the economic crisis by improving coordination between the government and the business community and trade unions.
The economic gloom hanging over Germany means the economy is certain to be a major battleground as Merkel bids for a second term in elections on September 27.
So far, a government scheme subsidising firms to cut working hours instead of laying off workers has helped broadly keep a lid on unemployment but one in 10 Germans could still be out of work when the country goes to the polls.
And the head of the DGB federation of German trade unions, Michael Sommer, warned in an interview ahead of Wednesday's summit in Berlin that mass layoffs would be taken as a "declaration of war" by workers and unions.
"At that point, social unrest can no longer be ruled out," Sommer told the Nordwest Zeitung regional daily.
"The size of the stimulus packages so far have been insufficient. They have to be strengthened and widened," he said.