The German patient: a slow and painful recovery

In the traditional autumn report published by Ifo in Munich, HWWA in Hamburg, RWI in Essen, IfW in Kiel, DIW in Berlin and IHW in Halle, the analysts lowered their economic growth forecast for 2006 from 1.5 per cent to 1.2 per cent. The current year is expected to close with a growth rate of only 0.8 per cent.

This is not enough to create new jobs, and the rate of unemployment will still exceed 10 per cent of the German workforce next year, too.

For the fifth consecutive year, Germany, according to the research institutes, will once again violate the permissible 3 per cent state budget deficit limit of the European Union with minus 3.1 per cent in 2006 (after minus 3.4 per cent this year).

Growth impulses were coming mainly from abroad, and they have hardly jumped over to the domestic demand, which has remained weak for an unusual long time.

The tentative economic recovery will be further dampened by the high oil prices. The institutes estimate that the Germans currently have to spend additional EUR20 billion on energy imports, which is the equivalent of almost one per cent of the GDP.

In a more controversial move, five out of the six institutes called on the ECB to reduce the 'expansiveness' of its monetary policy and raise its interest rates by a half-percentage point.

The surveys of the six independent economic research bodies are performed twice a year on behalf of the government. The experts meet in total seclusion for two weeks, observing strict secrecy. This year's autumn report comprises 93 pages.