BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh
BBCi CATEGORIES   TV   RADIO   COMMUNICATE   WHERE I LIVE   INDEX    SEARCH 

BBC NEWS
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 


Commonwealth Games 2002

BBC Sport

BBC Weather

SERVICES 
Friday, 28 December, 2001, 12:00 GMT
No respite for German economy
Volkswagen plant, Germany
German car factory: Hoping for an upturn
Europe's largest economy, Germany, is showing no sign of emerging from its protracted downturn as the year draws to a close.

Official statistics have shown that German wholesale sales fell by 10.7% on the year in November, signalling that demand remains weak.

Ernst Welteke of the European Central Bank's governing council added to the gloom on Friday by confirming that Germany is likely to exceed its 2.7% deficit target this year due to lower than expected tax revenues.

Under a European Union agreement committing members to budgetary discipline, countries which clock up a deficit of more than 3% could face hefty fines.

Recovery hopes dashed

The news extinguished hopes of an early recovery sparked earlier this month by an unexpected rise in the Ifo index, a closely-watched index of business confidence.

Expectations of a turnaround had already been shaken on Thursday, when a survey from Cologne-based forecasters IW predicted a sharp rise in unemployment next year.

The IW's survey of all 44 German industrial associations showed that 31 of them expected sales and unemployment to fall or stagnate in 2002.

German unemployment has already edged up by one percentage point to 9% during the course of the year.

Annus horribilis

The IW survey completed a grim year for the German economy.

German growth, which contracted by 0.1% between July and September, is now pegged at just 0.25% for the year as a whole, down from nearly 3% in 2000.

Analysts have attributed Germany's woes to its relatively high dependence on exports to the US, which slipped into recession in March.

They add that a downturn in Germany, which accounts for 35% of the eurozone's economic output, has worrying implications for the single currency area ahead of the launch of euro notes and coins.

High and rising budget deficits in Europe's leading economy could push the euro lower against the dollar, fuelling inflationary pressures.

This would in turn limit the European Central Bank's scope to deliver urgently-needed interest rate cuts aimed at boosting the flagging economy.

See also:

22 Nov 01 | Business
Germany's economy shrinks
22 Aug 01 | Business
Germany's feeling the pinch
27 Apr 01 | Business
French economy outshines Germany
08 Apr 01 | Business
Germany's vulnerable economy
07 Dec 01 | Business
German industry slumps
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories