Germany expects economic growth

German minister hopeful economy will rebound

He told the “Die Welt” newspaper that attaining a growth of two percent in 2004 would enable Germany to respect the rules of the European Union’s stability pact, which oblige the 12 nations using the euro to keep their public deficits within three percent of gross domestic product (GDP).

 

“Economists also say our measures are a good basis for reaching the two-percent growth we forecast for 2004,” Eichel said.

  

“If we apply our reform programme to the 2004 budget successfully and completely and we bring forward the tax cuts by a year, we can set ourselves the goal of respecting the (euro-zone) stability criteria via growth,” Eichel told the paper.

 

Berlin is relying on two-percent growth in 2004 to offset the financial impact of a vast programme of economic and social reforms, including plans to accelerate tax cuts it hopes will stimulate the economy.

 

He said the government still aimed “to balance the budget as swiftly as possible” but that it was “nonsense” to set a deadline for achieving that goal.

 

Stagnant

  

Germany needs growth, stable social security schemes and cuts in subsidies, he explained.

 

Growth in Europe’s biggest economy has been stagnant for the last two years, and the German government is officially predicting 0.75 percent growth in gross domestic product for 2003.

  

Economic forecasting institutes are much more pessimistic than the government. Several predict zero growth next year, while some expect a rise in 2004 of only 1.3 percent.

  

Germany’s deficit shot up to 3.6 percent of GDP last year and looks likely to exceed the euro-zone ceiling again both in 2003 and 2004.

  

As a result, the European Commission, the EU’s executive arm, has imposed on Berlin an “excessive deficit procedure” — a set of recommendations that Germany must follow to avoid multi-billion-euro fines.