Germany 'on the brink of recession'

The institutes have called for Europe-wide tax and interest rate cuts

Germany has suffered a sharp fall in growth this year and the recovery next year is likely to be very slight, a bi-annual report from the country's top six economic institutes has warned.

Europe's largest economy "is on the brink of recession", the report said, calling for tax cuts and lower interest rates across the European Union in order to secure a recovery in 2002.

Growth in Germany is expected to slip to just 0.7% this year from 3% in 2000, then next year it is expected to bounce back to 1.3%, according to the institutes' predictions.

The 11 September terrorist attacks on the US got parts of the blame for the economic slowdown.

Hurry, hurry

In a direct challenge to the Berlin government, the wise men have added their voice to German industry and oppostion demands for urgent measures to stimulate Europe's biggest economy.

They warn that without loosening the government's tight public finances, the risk of a recession will increase significantly.

Specifically, they say tax cuts planned for 2003 should be brough forward by a year.

"Finance policy needs to reflect the economic risk," the institutes insisted.

The planned 13.5 billion marks cuts ($6.2bn, £4.3bn, 6.9bn euros) are part of a 60bn marks tax-relief package that has been approved for the period 2001-2005.

There is much resistance from the government against an early release of any tax-cut packages since this would delay efforts to balance its federal budget by 2006.