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| Workers are accepting pay cuts to keep their
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Germany's six top
economic institutes have cut their economic growth forecasts for this year
in half.
They are now predicting the German economy will grow by just 0.7%,
compared with their earlier predictions of 1.5%.
Chancellor Gerhard Schroeder has said the new forecasts are "not good".
Exports are being curbed by the strong euro, oil
prices are hurting business and domestic demand remains stubbornly
slack
, the six think tanks
said.
Weak growth is likely to intensify the problems facing Chancellor
Schroeder's centre-left government as it battles to prune state spending
at a time of record post-war unemployment.
Five million Germans were out of work last month, giving a jobless rate
of 12%, compared with about 5% in the UK and the US.
Chancellor Schroeder said the forecasts were "not as high as we had
hoped".
He was speaking at a joint press conference with France's President
Jacques Chirac in Paris, where the German leader is trying to aid Mr
Chirac's increasingly embattled campaign for a 'Yes' vote in France's
referendum on the new EU constitution.
As Germany is the biggest economy in the eurozone , and the third
biggest globally, its economic woes can spell trouble for other eurozone
countries.
The think tanks said Germany found itself "in a spot of economic
weakness this spring", adding that the recovery seen in the early part of
2004 had "come to a standstill". Germany grew 1.6% in 2004, its best level
since the late 1990s.
"At the moment, high oil prices and the rise in euro are making
themselves felt not only in Germany, but also among its trading partners
in Europe," said Joachim Scheide, chief economist at Ifw, one of the six
think tanks.
The European Central Bank (ECB) is now thought likely to keep interests
rates steady at 2% for a while longer. Rates have been left unchanged for
almost two years.
The new, gloomier forecast echoes that of the International Monetary
Fund, which has slashed its 2005 forecast for Germany to 0.8% from 1.8%.
The six think tanks are DIW, HWWA, IW, RWI, IWH and Ifo. Their previous
set of predictions were issued in October.
(BBC) | 
Updated: 2005-04-27 09:01
