GERMANY sliced its 2013 growth forecast yesterday, with the Eurozone powerhouse dragged downy by tough currents in the world economy.
The biggest economy in the euro area will grow just one per cent next year, the German economy ministry said, down from a more optimistic previous forecast of 1.6 per cent.
The Eurozone heavyweight, led by Chancellor Angela Merkel, had previously proved resilient to world and European troubles, posting 4.2 per cent growth in 2010 and three per cent growth in 2011, but the predictions suggest it has finally succumbed – though it will still grow.
“Germany is navigating stormy waters because of the European sovereign debt crisis and an economic weakening in emerging nations in Asia and Latin America,” said economy minister Philipp Roesler in a statement.
But Tobias Blattner and Emily Nicol at Daiwa Capital Markets said the forecasts were still too optimistic. “[The new forecasts do] not properly take global headwinds as well as the new round of deep budget cuts forthcoming in large parts of the euro area,” they said. They went on to predict growth of just 0.7 per cent next year.
This came as finance minister Wolfgang Schäuble called for the establishment of an EU “currency commissioner” with the power to scrutinise and reject member state budgets, as part of a general package of European political and economic integration.
“We must now make bigger steps in the direction of a fiscal union,” Schäuble told reporters on his way back from a trip to Asia, “We must use this chance.”