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Blow for Eurozone recovery hopes as Bundesbank slashes German growth forecastBundesbank prediction is down one per cent from JuneThe German central bank expects a 0.4 per cent growth in 2013, down from 1.6 per centNews preceded U.S. unemployment fall to 7.7 per cent
22:41 GMT, 7 December 2012
The German economy could slam into reverse this winter as the crisis in the eurozone intensifies, the country’s central bank warned yesterday.
The Bundesbank slashed its growth forecasts in an abrupt reversal for Europe’s powerhouse economy. It now expects Germany to grow by 0.7 per cent this year and just 0.4 per cent next year.
It was previously expecting growth of 1 per cent in 2012 and 1.6 per cent in 2013.
New predictions: Germany's central bank Bundesbank slashed its forecasts for 2013 and 2014
But the Bundesbank added that there was a risk of recession – defined as two quarters of contraction in a row – this winter.
‘There are indications that economic activity may fall in the final quarter of 2012 and the first quarter of 2013,’ it said.
Germany has been the key driver of an otherwise moribund eurozone.
The Bundesbank blamed the crisis crippling the eurozone for the downturn amid signs that German patience with struggling economies such as Greece and Spain is wearing thinnk by 2.6 per cent in October 2012
Experts warned the country’s slump is ‘a big reality check’ and casts doubt over the future of the single currency.
Any setback in the eurozone, Britain’s major trading partner, raises the risk of a new recession here.
The Bundesbank blamed the crisis crippling the eurozone for the downturn amid signs that German patience with struggling economies such as Greece and Spain is wearing thin.
‘Germany cannot prosper alone,’ it said. ‘It has a particular interest in the welfare of its partners.’
The gloomy analysis came a day after the European Central Bank warned that the 17-nation eurozone will remain mired in recession until late next year.
ECB president Mario Draghi said a ‘gradual recovery’ will not start until ‘later in 2013’ as the region lurches from one crisis to the next.
The eurozone sank back into recession over the summer as the malaise in peripheral states spread to Germany and France.
The German government put on a brave face in response to the Bundesbank forecast. A spokesman for Chancellor Angela Merkel said: ‘The government is cautiously optimistic that we’ll keep growing.’
U.S. EMPLOYMENT RATES DOWN TO 7.7 PER CENT
Unemployment in the US has dropped to a
four-year low in a boost for re-elected President Obama. It fell from
7.9 per cent in October to 7.7 per cent in November – a level not seen
since December 2008. Colin Edwards, of the Centre for Economics and
Business Research, said it was ‘good news for the UK, as the US is the
destination for a sizeable proportion of UK exports’.