German economy shows vulnerability

Jan. 11, 2012 at 3:31 PM
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FRANKFURT, Germany, Jan. 11 (UPI) -- The German economy took one step toward a recession in the fourth quarter of 2011, the government's statistical office said Wednesday.

A recession is commonly defined as two consecutive quarters of economic contraction. From October through December, the German economy shrank by 0.25 percent, the Federal Statistical Office said.

For the year, Germany's economy was clearly the head of the Group of 7 Nations with growth of 3 percent, The New York Times reported.

The second fastest pace of growth among G7 countries was Canada with "a little over 2 percent," growth, economist Ralph Solveen at the Commerzbank in Frankfurt, Germany, said.

Solveen estimates U.S. economic growth for 2011 at 1.7 percent "or a little more," the Times said.

For 2012 in Germany, "uncertainty is unusually high," said economist Christian Schulz at Berenburg Bank in London.

"If the euro crisis does not get worse or is finally brought under control after another wave in early 2012, the German economy can rebound nicely from the summer onwards," he said.

But some economists are predicting a recession for Germany.

On the positive side, however, Germany appears to be walking the talk regarding the disciplined fiscal policy it espouses for the rest of Europe.

The country's deficit is at 1 percent of the gross domestic product, "far below the 3 percent reference value set by the Maastricht Treaty," Solveen said.

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