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Monday, July 21, 2003

German Recession Digs in Deep

It still isn't official of course, but there is every sign that recession in Germany is here, and that it is digging in for the season. The latest Bundesbank monthly report doesn't expect recovery any time soon, and neither do I.

The German economy, Europe's largest, failed to rebound in the second quarter from a contraction in the previous three months and there are no signs to suggest a recovery soon, the Bundesbank said. "The available indicators don't suggest that economic output in the second quarter managed to detach itself from the basic trend of stagnation,'' the Bundesbank said in its monthly report. "An improvement in the near future is not in sight.'' Germany's economy - about a third of the economy of the dozen euro nations - is close to recession after shrinking in the first quarter. To boost growth and fight unemployment, Chancellor Gerhard Schroeder plans to speed up income-tax cuts, ease labor laws and trim jobless benefits. Bundesbank President Ernst Welteke said today the government shouldn't expect any more help from the European Central Bank, after it cut its main lending rate to a half-century low in June. "I see no need to act at the moment,'' Welteke said in a televised interview with Bloomberg News in Frankfurt. "The conditions are there for stronger growth'' in the dozen nations sharing the euro.
Source Bloomberg

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