Fwd: Macroperu La Economia de Alemania en el 2009

German economy to contract 7pc this year

Germany faces the sharpest economic downturn of any major country in the Western world as unemployment rockets to 5m.

_______________________________________________________________________________________________

By Ambrose Evans-Pritchard
Last Updated: 8:05PM GMT 23 Mar 2009

The country may be on the cusp of a Japanese-style "Lost Decade", according to a clutch of grim forecasts by leading banks and economic institutes.

Commerzbank said output is likely to contract by 6pc to 7pc this year as the global recession wreaks havoc on German industrial exports. Foreign industrial orders have fallen by 37pc over the last year.

"The recent collapse in orders compels us to make a massive downward revision to our economic outlook. January orders and production data plunged at a dramatic pace that has no precedent in Germany's post-World War Two history," said Jörg Kramer, the bank's chief economist.

The country's leading think tanks have been scrambling to adjust as it becomes ever clearer that the country went off a cliff over the winter. The IMK Institute has slashed its forecast to minus 5pc this year. The RWI Institute warned that unemployment could reach 5m by the end of 2010 as the delayed time-bomb of mass lay-offs finally detonates.
The mounting social damage is likely to have a transforming effect on the German political landscape when election are held this Autumn. The neo-Marxist Left Party, which proposes nationalisation of huge chunks of the economy, is already angling for 30pc of the vote in Thuringia's regional elections in June as it tears into the Social Democrat flank.
Mr Kramer said Germany is suffering the brunt of the global slump because 40pc of GDP stems from exports. It is heavily reliant on machine tools and engineering that is levearaged to global industrial cycle. "There will be no upward movement next year that deserves to be called an upturn," he said.

The only other G10 country likely to face the same sort of destruction this year is Japan (-7pc), another industrial export power. The bank expects Italy to contract by 4.5pc this year, the US by 4pc, Britain by 3.9pc, and France by 3.5pc.
Axel Weber, the Bundesbank chief, signalled on Monday that European Central Bank is ready to cut interest rates again. "Rates are at 1.5pc in the euro area and heading down," he said.

Mr Weber defended the ECB against a chorus of criticism that it has misread the threat of global deflation and held monetary policy too tight, amplifying the downturn. "We have put in as much monetary stimulus in a short period of time as the central banks in the US and UK," he said.

He said it was unfair to contrast the meagre stimulus packages in Europe with spending blitz in other parts of the world, insisting that generous unemployment pay in most eurozone states acts as an automatic "stabiliser".

There is little doubt however that hawkish policies in Europe have pushed the euro to levels that are taking a toll on manufacturing industry. Eurozone exports fell 24pc in January from a year earlier.

Charles Dumas, global strategist at Lombard Street Research, said Europe's leadership class have ensured "likely disaster" for EMU by assuming for so long that they could continue to rely on "predatory export-led growth" by feeding off world demand rather adopting radical stimulus measures of their own.

"It looks as if surplus countries, particularly those of north-central Europe clustered around Germany, imagine they can wait for recovery and then enjoy export-led growth again," he said.

Mr Dumas said that Europe was paying a high price for refusing to signal its disdain over quantitative easing in the US, Britain, and a growing number other countries. "The higher euro is a disaster for the overvalued countries of Club Med as well as Germany. Italy is overvalued by almost 50pc and is completely sunk in current conditions," he said.

Luxembourg's premier Jean-Claude Juncker, head of the Eurogroup of finance ministers, said the EU had plans to rescue any eurozone state in serious trouble "within hours" but insisted that no such need would ever arise.

__._,_.___