GDP data ease recession fears in Germany

Germany edged away from the threat of recession today, with flat fourth-quarter growth giving a respite from persistent gloom…

Germany edged away from the threat of recession today, with flat fourth-quarter growth giving a respite from persistent gloom in Europe's biggest but worst performing economy.

The fresh data indicated that Germany, often seen as the sick man of 12-country euro zone, may be shrugging off months of malaise.

The federal statistics office reported zero growth - news that pleasantly surprised analysts who had forecast a contraction of 0.1 per cent which would have put Germany on a path towards recession. That is defined as two consecutive quarters of a contraction of gross domestic product (GDP).

For all of 2002, the statistics office reported the German economy had grown at an anemic rate of 0.2 per cent, the same as its earlier forecast and down from 0.7 per cent in 2001.

READ MORE

Stronger domestic consumption has balanced out stagnating exports however, a change from the classic German model of an export-driven economy, the office added.

The news came on the heels of a remarkably upbeat business confidence index by German executives in a closely watched survey published yesterday by the Munich-based Ifo institute.

The hazy hints of an upturn may give a slight boost to embattled Chancellor Gerhard Schroeder, who has suffered an unprecedented drop in popularity since September's general election.

Industry and the opposition have urged the center-left government to tackle "structural rigidity" hobbling the German economy - the maze of red tape and the exorbitant cost of job creation due to the lavish social welfare system.

Analysts said that until the Mr Schroeder faces those challenges head-on, minor improvements in the economy are all that can be expected.

AFP