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Germany faces 'sizeable', possibly extended recession: IMF

3 days ago

BERLIN (AFP) — Germany faces a "sizeable" and "possibly extended" recession, with its economy set to shrink 2.5 percent this year, the International Monetary Fund said Thursday, revising down a previous forecast.

Last November, the IMF had said Europe's largest economy would contract 0.8 percent in 2009. Germany can expect a "slow recovery" in 2010 but would still grow by only 0.1 percent, the Fund said Thursday.

The projection is even gloomier than Berlin's own assessment of its economic plight. The economy ministry said Wednesday the economy would shrink 2.25 percent in 2009 before rebounding slightly next year.

The IMF also warned that the "risks remain tilted to the downside.

"Germany faces the prospect of a sizeable, and possibly extended, economic downturn," it said.

The IMF praised Berlin's efforts to kick-start the ailing economy but suggested that it could have acted sooner and in close co-operation with other European countries.

"Global policy actions and measures to contain the risk of a costly global self-reinforcing slump should preferably be co-ordinated regionally and internationally for maximum effect. Germany has a special leadership role to play in this process," the report said.

While other major European economies, such as France and Britain, rapidly agreed massive fiscal stimulus packages and bank bailouts to stave off the worst effects of recession, Germany was slower to react, earning Chancellor Angela Merkel the soubriquet "Madame Non."

But last week, German authorities wrapped up a 50 billion euro (65 billion euro) shot in the arm for the economy, including a huge increase in public spending on roads, railways, hospitals and schools, and tax cuts.

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