The German government has announced that the country is on the verge of a recession, due to the financial crisis and the struggling world economy.
Ongoing effect of the economic downturn led the government to lower the 2009 growth forecast in Europe's biggest economy from 1.2 percent Germany cuts growth forecast for 2009 ...
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But Economy Minister Michael Glos said in Berlin that there is no need to panic.
For the current year the minister is still expecting gross domestic product (GDP) growth of 1.7 percent. Though that number is also down from 2.5 percent.
"We are just seeing some slowdown in the economy," Glos said. "There is nothing to sugarcoat or cover up."
Too early to foresee crisis' outcome
Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Glos said Germany should reform its tax system Glos insisted that his latest forecasts entailed a "high degree of uncertainty" as it was still too early to predict exactly how the current financial crisis would pan out into the so-called "real" economy.
Glos went on to say that the financial firestorm that swept through financial markets in recent weeks underscored the need for Germany to launch another overhaul of its tax system.
"Beyond what we've already agreed, there is an urgent need for tax relief," said Glos.
The release of Berlin's revised growth projections also coincided with the nation's Chamber of Industry and Commerce (DIHK) cutting its German economic forecasts and seeing the nation entering a period of stagnation.
Negative indicators
The DIHK expects growth in Germany to come in at just 0.5 percent in 2009 with economists seeing the world's leading export nation as being particularly vulnerable to a global slump in exports as the downturn in the international economy intensifies.
Previously the DIHK had expected the German economy to expand by 1.2 percent. Germany is expected to grow this year by about 1.7 percent.
The DIHK also released a survey showing a growing sense of gloom among 25,000 of its company members about the economic outlook.
"There is no doubt that company expectations have been significantly dampened," said DIHK chief Martin Wansleben unveiling the new growth forecasts in Berlin. "But we are far removed from any reason to panic."
The DHIK survey said the number of its members who see a decline in business conditions increased to 27 per cent from 17 per cent in June. The number of companies expecting exports to slump dropped from 24 per cent to 17 per cent.
Wansleben said that signs of slowing export markets had already started to emerge.
According to government forecasts, the economic slowdown will also leave its mark on the German labor market, where unemployment has been on a downward trend for more than two years.
Glos predicted that the jobless total will average an annual 3.3 million next year, the same level as this year.
(Deutsche Welle)
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