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Thursday, 17 January, 2002, 09:38 GMT
Germany on brink of recession
The BASF plant in Ludwigshafen
German output started to shrink in the second half of last year
The German economy is teetering on the brink of official recession, officials have said, after figures showed growth in 2001 slowing to its lowest level for eight years.

Growth in Germany's gross domestic product (GDP) last year was 0.6%, compared with 3% in 2000.

The Federal Statistics Office told BBC News Online that it was too early to say whether the economy met the official definition of recession - two successive quarters of contraction.

After shrinking in the July-to-September quarter, growth was around zero over the last three months of the year, the office said, but there were too many estimates in the calculations to make an unequivocal figure possible.

Finalised figures for the October-to-December quarter are due out in March.

Political problems

Ahead of official confirmation, analysts are already working on the assumption that a recession is a reality.

Chancellor Gerhard Schroeder
Unemployment could prove a poll headache for Mr Schroeder

But the GDP news was enough to cause a modest fall in the value of the euro, which is highly sensitive to German economic performance.

The German economy, by far the largest in the European Union, started to contract in the second half of last year, sparking fears that it could provoke a Europe-wide slump.

Germany's sputtering economy is likely to be a key issue in federal elections, due in late September this year.

The slowdown has forced Chancellor Gerhard Schroeder to abandon a pledge to cut unemployment to 3.5 million in time for the vote.

December unemployment data announced last week showed the number of jobless not far off the politically sensitive 4 million level.

Brave face

The German finance ministry was determined to put a positive spin on the GDP figures.

Economic activity should pick up significantly this year, it said, thanks to recent interest rate cuts, falls in inflation and oil prices and tax cuts.

"Almost all observers expect economic activity to revive in the course of this year," the ministry said.

"Under these conditions economic activity should stabilise again and the momentum of growth should significantly speed up."

See also:

27 Nov 01 | Business
Germany 'is already in recession'
22 Nov 01 | Business
Germany's economy shrinks
22 Nov 01 | Business
Rich countries on the brink
22 Nov 01 | Business
UK economic growth trimmed
21 Nov 01 | Business
Pessimism worsens among German firms
08 Nov 01 | Business
ECB takes bold action
23 Oct 01 | Business
Germany 'on the brink of recession'
16 Oct 01 | Business
Jobs woe for German economy
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