Germany Faces `Extremely Difficult' 2009, Steinbrueck Says
German Finance Minister Peer Steinbrueck said Europe's biggest economy will struggle to grow next year amid the fallout from the financial crisis.
“We'll be entering an extremely difficult year in 2009,'' Steinbrueck told reporters in Washington today after a meeting of Group of Seven finance ministers and central bank governors. “The crisis is already spilling over into the real economy.''
Chancellor Angela Merkel's government will accept tax revenue shortfalls and higher spending for unemployment benefits to cushion the slowdown, and will resist cutting spending, Steinbrueck said. After posting a small budget surplus in 2008, the slowdown will squeeze public coffers next year, he said.
The comments suggest Steinbrueck may have to abandon his goal of eliminating by 2011 the federal budget deficit, the only component of Germany's overall budget that's still in the red. Putting public finances in order has been the hallmark of Merkel's ruling coalition, which faces a federal election in 2009.
Still, unlike other economies, Germany is facing only a worsening of financing conditions and not a credit crunch, Steinbrueck said. There's been no property-market bubble that might aggravate the economic downturn and the labor market remains solid, he said.
German unemployment fell more than economists forecast in September as machine makers hired people to work off an order backlog, the Federal Labor Agency said Sept. 30. Consumer confidence unexpectedly rose for the first time in five months after falling fuel prices left people with more to spend on food and clothing, GfK AG said Sept. 25.
The Sueddeutsche Zeitung newspaper today reported the government will cut its 2009 economic growth forecast to zero or slightly above zero next week. Economy Minister Michael Glos will present new forecasts for 2008 and 2009 on Oct. 16.