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Thursday, 18 October, 2001, 06:53 GMT 07:53 UK
German finance minister warns on growth
German shopper
German growth is expected to fall below 1.0% this year
Growth in the German economy, Europe's largest, is set to fall well below official forecasts, the country's finance minister has said.

Hans Eichel warned that the economy would expand by about 0.75% this year, compared with a government target of about 2.0%.

"We have at the moment this year growth of under 1%. We have to draw up new estimates but I think we will reach 0.75%" he told German television station ZDF.

Meanwhile, Germany's leading trade unions have called for a multi-billion euro economic stimulus package to boost the German economy.

Growth cut

Government officials have warned for months that growth will fall below target.

But few have forecast an outlook as gloomy as that predicted by Mr Eichel.

"Next year we will clearly come in below the 2 - 2.25% we had assumed," he added.

"It will be somewhere between 1% and 1.5%.

"That means our financial planning has to be reworked but we are firmly sticking to our goal of balancing the budget by 2006."

Mr Eichel also said the implementation of tobacco tax increases, planned for 1 January next year, was likely to be delayed by "one, two or three months".

Unemployment rising

Germany's export-based firms have been hit by the global slowdown, and domestic demand has been subdued despite income tax cuts at the start of the year.

Although oil prices are well off their highs, domestic demand is expected to continue to remain subdued following the huge layoffs in the hi-tech and financial sectors.

Unemployment has risen throughout the year.

Dieter Hundt, the head of Germany's employers' federation told SWR radio he was "deeply worried" about the economy.

German unemployment is expected to rise to more than 3.9 million in 2002, far above a government target of 3.5 million, which it has pledged to reach by the next general election in September 2002.

Union demands

At a news conference, the DGB trades union confederation called for an economic stimulus package and lower European Central Bank interest rate to prevent the economy entering "a deep recession".

IG Metall deputy chairman Juergen Peters also rejected calls for moderate wage increases in next year's pay bargaining round.

IG Metall and Verdi, DGBs biggest members, together represent five million metalworker and service sector employees.

See also:

16 Oct 01 | Business
Jobs woe for German economy
15 Oct 01 | Business
Siemens cuts 7,000 more jobs
15 Oct 01 | Business
Commerzbank sheds 3,400 jobs
09 Oct 01 | Business
German unemployment rises
21 Sep 01 | Business
German business confidence falls
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