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Germany’s economic recovery stalls

Jan - 12 - 2012
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German Chancellor Angela Merkel (R) and Italian PM Mario Monti at a press conference on January 11, 2012 in Berlin.German Chancellor Angela Merkel (R) and Italian PM Mario Monti at a press conference on January 11, 2012 in Berlin.

  • Germany's economic recovery went into reverse at the end of last year
  • The country still notched up 3 per cent growth in 2011
  • Economists expect this year will see sharply slower growth or even stagnation

Wiesbaden (Financial Times) -- Germany's economic recovery went into reverse at the end of last year but the country still notched up 3 per cent growth in 2011 -- twice as fast as in the US and the rest of the eurozone.

Highlighting the robustness of Europe's largest economy -- even as the eurozone debt crisis escalated -- the Wiesbaden-based federal statistics office reported 2011 overall had seen only a modest slowdown from the 3.7 per cent growth seen in 2010, which was the fastest since the country's reunification in 1990.

However, Wednesday's figures did not dispel fears that even Germany was being hit by the eurozone crisis. The statistics office estimated German gross domestic product had fallen by about a quarter of a per cent in the fourth quarter. That increased the chances of German falling into recession -- defined as two quarters of contracting activity.

Economists expect this year to see sharply slower growth or even stagnation. The Bundesbank is forecasting that growth will slow to 0.6 per cent in 2012 - before re-accelerating to 1.8 per cent in the following year.

Last year also saw Germany's public sector deficit fall to just 1 per cent of GDP, down from 4.3 per cent in 2010. That brought the country clearly back below the 3 per cent limit set for eurozone member states.



Leaders meet to discuss Italy's debt

The statistics office said growth in 2011 was powered largely by investment and consumer spending. That contrasted with the country's usual reliance on export-orientated companies to drive growth. The upswing, which resulted in steadily falling unemployment, had left it among the best placed to weather the storms created by the eurozone debt problems, it said.

Germany had "again come out well from the crisis," said Roderich Egeler, the statistical office's president. However, he pointed out that growth had taken place mainly in the first half of last year. GDP figures for the fourth quarter will be published in mid-February.

Details for last year showed investment spending expanding by 8.3 per cent compared with 2010. Exports increased by a similar amount but were offset by a 7.2 per cent rise in imports. Private consumer spending increased by 1.5 per cent -- the fastest for five years.

The robust growth was accompanied by a 1.3 per cent rise in employment -- with the number employed in Germany reaching a record high of 41.1m. In turn, the favourable labour market, helped fuel the economic expansion.

The US economy is estimated to have growth by 1.6 per cent in 2011, while the eurozone economy expanded by 1.5 per cent. Within the European Union, only Sweden, Poland, Finland and the Baltic States grew faster than Germany last year.

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