Merkel sees grim 2009 for recession-hit Germany
AFP - Monday, November 24
BERLIN (AFP) - - Germany's fractious "grand coalition" government warned of a grim 2009 Sunday as it heads into an election year, but it remains deeply divided over the right medicine for Europe's biggest economy.
"We must expect that next year will be a year of bad news, at least in the first months," Chancellor Angela Merkel said.
She told Sunday's Welt am Sonntag newspaper it had grown even harder to predict the progress of the global and German economies.
"We have stabilised the financial markets thanks to a series of measures for the banks, but confidence still has to be found again and the interbanking market must become functional again," Merkel said.
Finance Minister Peer Steinbrueck of the Social Democrats, the conservatives' traditional rivals, echoed the gloomy sentiments.
"We are in a recession and we have a difficult 2009 ahead of us," he told the Tagesspiegel am Sonntag.
Merkel and Steinbrueck sharply rejected calls by business leaders and from within her CDU/CSU conservative alliance to slash taxes, saying such proposals would remain off the table until after the September 2009 general election.
But Horst Seehofer, the leader of the CDU's Bavarian sister party, the CSU, said Germany could not afford fiscal discipline when faced with a long and steep economic slowdown.
"In such a difficult situation we cannot rescue the country by saving it to death and aggravating the crisis," he told the Bild am Sonntag newspaper, noting that he agreed with US president-elect Barack Obama on this point.
Economy Minister Michael Glos, also from the CSU, said an economic stimulus package stitched together this month could only be the beginning if Germany wanted to steel itself against the global financial turmoil.
"I am of the opinion that we must be more decisive," Glos, who last week openly criticised Merkel's handling of the crisis, told the Der Spiegel news magazine.
"It would help the economy if we decreased taxes for lower- and middle-income earners."
The head of the Federal Labour Office Frank-Juergen Weise said Germany could expect 130,000 more unemployed if the economy -- as some analysts have predicted -- shrinks 0.5 percent next year, in an interview to be published in Monday's Bild newspaper.
In October, 2,997,000 people were listed on jobless rolls.
The president of the German Chambers of Commerce and Industry, Ludwig Georg Braun, said consumers needed more cash in hand immediately. "Lowering taxes is the best growth programme," he told the BZ am Sonntag newspaper.
And a top economic advisor to the government, Wolfgang Wiegard, said the crisis facing Germany was "no normal slowdown" -- and thus it was only right to deepen the public deficit if it would jump-start the economy.
"But you have to determine which outlays you will cut when the economy improves again to secure the long-term financing of the tax cuts," he told the Handelsblatt business daily in an interview to be published Monday.
Seehofer, Glos and business leaders went on to urge Merkel to fight to water down a European Union climate-change pact to be adopted at an EU summit next month until the nation's recession-wracked economy is moving again.
To do so now, they argued, would deal a body blow to the crucial automobile industry in Germany, where one in seven jobs is estimated to be dependent directly or indirectly on the sector.
In a sign of the times, a poll released in this week's Stern magazine showed that one in three Germans -- already notoriously frugal shoppers -- say they plan to spend less on holiday gifts this year.
But a separate survey by the independent Forsa institute showed Germans split between those who expected their personal finances to worsen next year (23 percent) versus those who foresaw an improvement (20 percent).
Official data released this month showed Germany slipped into recession for the first time in five years, as the world's third-biggest economy and its top exporter felt the sting of global financial crisis.
Merkel's government has put forward an economic stimulus package it says is worth 32 billion euros (40 billion dollars) over two years, but economic analysts contend Berlin must do more.
Recommend this article
Average (0 votes)
Sign in to recommend this article »
Most Recommended Stories »
German Chancellor Angela Merkel addresses the 10th German World Bank Forum conference in Frankfurt/Main, western Germany on November 20, 2008. Germany's fractious "grand coalition" government warned of a grim 2009 Sunday as it heads into an election year, but it remains deeply divided over the right medicine for Europe's biggest economy.
Most Popular – Top Stories
Stricken German public bank KfW expects further losses
Slump in Europe spreads wider
Over 200 narwhal trapped in Canadian ice
Japan scientists eye made-to-order bones
New strain of deadly Ebola virus discovered
View Complete List »