World Economic outlook - Germany GDP Growth Forecast 2012-2013, germany economy projections 2012-2013,German exports, German inflation rate prediction 2012-2013 : Germany released a cautious outlook on its economy Wednesday as it urged Europe to stick to tough austerity measures and called on the European Central Bank to scale back its activities to prop up beleaguered euro-zone countries.
Presenting the government's annual Spring economic outlook, Economy Minister Philipp Roesler said the German economic recovery was gaining pace but warned that recession in several European countries and the continuing euro-zone debt crisis could still cause Europe's growth engine to stall.
As a result, government forecasters held their growth projection steady at 0.7% for this year and 1.6% next year. They also warned that exports would grow just 3% this year, climbing to 5% next year as the economy picks up.
"Even if the German economy is in great shape, we are still staying on the cautious side with our projection," Roesler told reporters at a news conference in Berlin. "Because risks in the international arena are still high. The European sovereign debt crisis has not been solved."
The latest projections by the German government come as several European countries--including the U.K. and Spain--are sinking into recession. In addition, tough debt-reduction measures are forcing weak countries such as Greece even deeper into recession, sparking a debate over whether the German-led austerity solution for Europe's debt woes is making matters worse.
The German government argues that its labor market reforms, wage restraint, and debt reduction over the past decade have laid the foundation for the relatively good economic health of the country now and that this should be a lesson for euro-zone countries struggling to reduce heavy debt loads.
"The positive developments in Germany show that budget consolidation and bold structural reform of labor markets pay off," said Roesler. "That is also an important message for our partners in Europe."
The DIW economic research institute estimated that the German economy grew about 0.4% in the second quarter after about 0.1% in the first quarter. A major drag on the economy remains weaker exports, a result of the struggling economies in Europe where the bulk of German exports are sent.
Germany's economic recovery is not only threatened by potential shocks from a flare-up of the euro-zone debt crisis, said Roesler. He warned that inflation spurred on by rising oil prices could also threaten economic recovery and therefore urged the European Central Bank to return to its core mandate of fighting inflation.
"The ECB has our support so that it can return to normalcy and focus on its clear mandate to ensure price stability," Roesler said in a rare candid comment about monetary policy by a government official.
Roesler's comments come after German central bankers Jens Weidmann, head of the Bundesbank and a member of the ECB's Governing Council, and Bundesbank board member Andreas Dombret said the Frankfurt-based ECB should discuss an exit strategy from its efforts to prop up European banks and weak euro-zone members with a flood of cash.
Mario Draghi, president of the ECB, told European Parliament on Wednesday that while the ECB was not considering any imminent action to support the euro zone, "any exit strategy is premature given the current economic situation."
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