Economics Minister Paints Gloomy Picture for Germany

Economics Minister Guenter Rexrodt delivered a gloomy assessment of Germany’s short-term economic prospects on Wednesday, predicting zero growth this year as the country struggles to overcome the effects of a global slowdown and the task of rebuilding the formerly Communist east.

“Growth has come to a standstill,” Rexrodt said at a news conference here in which he presented the government’s annual economic report. “Almost all the important indicators are going in the wrong direction.”

Because its economy is the dominant one in Europe and the world’s fourth-largest, Germany’s economic performance is a major influence on the fortunes of countries in Europe and beyond. For example, policies of the Bundesbank, the powerful German central bank, to maintain high interest rates to keep German inflation in check are viewed by many economists as a key factor in deepening the recessions of many Western countries.

Acting on a series of pessimistic forecasts in recent weeks, the Bundesbank last week finally bowed to domestic and global pressure and cut key interest rates to ease the domestic economic decline and relieve pressure on weaker European currencies tied to the strong German mark within the European Monetary System. The move was applauded internationally, and stock markets jumped sharply.

Rexrodt said Wednesday that further interest-rate cuts are vital to revive Germany’s sagging economy.

He predicted the country’s gross domestic product will probably show no growth at all for 1993, with a decline of up to 1% in western Germany offset by growth of between 5% and 7% in the far smaller east. Unemployment will probably rise by another 450,000 nationally as industrial production, investment levels, exports and incoming orders all keep sliding, he said.

Rexrodt, who took over the key Economics Ministry post only two weeks ago after scandal toppled his predecessor, Juergen Moellemann, initially avoided using the word recession, instead talking of a “cyclical downturn.” But he then admitted, “A downturn is also a recession.

“Whether it’s the deepest of the postwar or not, we don’t know, but what we have to do is mobilize our resources so that it doesn’t come to that,” he added.

The pessimistic outlook is bad news for Chancellor Helmut Kohl’s government, whose slide in the opinion polls is almost certain to accelerate as the economy worsens.