‘Alarm signal’ Dire warning as German economy tipped to grow by just 2.7%

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And analysts have described the prediction, by the German Council of Economic Experts, as an “alarm signal” for Mrs Merkel and her Government colleagues. In March, the collective of economists had projected an increase in GDP of 3.1 percent in 2021.

However, a report published on Wednesday significantly revised this downwards, to 2.7 percent.

Joachim Lang, General Manager of the Federation of German Industries (BDI) said: “The report is an alarm signal for German politics.

“Tensions in supply chains have weakened production and export.”

Mr Lang warned: “The coming months promise little improvement.

“The lack of raw materials, chips and intermediate products, as well as congestion at ports and insufficient container capacities, will continue to affect the industry.

“For an upswing to resume, politics and business must work together to overcome these tensions.”

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If the German economy wants to reach pre-crisis levels in the coming year, it was crucial for politicians to remove pandemic-related restrictions on growth via another successful vaccination campaign, Mr Lang stressed.

He explained: “Politicians must do everything to ensure that the number of vaccinations continues to rise and that booster vaccinations are carried out systematically.

“It must not be that a small group of people who refuse to be vaccinated paralyses an entire society with the majority of those who have been vaccinated.”

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The future federal government – whoever it was led by – needs to create “a suitable environment for the transformation towards a climate-neutral economy”, Mr Lang stressed.

He said: “Massive investments are required – from both private and governmental sources.

“The new budget must provide answers to the crucial funding questions so that the necessary investments can happen quickly.

“This can only be achieved if planning and approval procedures become simpler and faster. “

The Council is anticipating stronger growth of 4.6 percent next year.

Volker Wieland, a member of the Council, said: “Fiscal policy should be normalised after the crisis, the sustainability and crisis resilience of public finances should be strengthened again.

“Monetary policy best contributes to sustainable economic growth by ensuring price stability.

“A normalisation strategy should be published for this purpose.”

Colleague Monika Schnitzer stressed: “Germany needs a coherent and overarching digital strategy at the federal level that prioritises measures, links the various initiatives more closely and avoids duplicate structures.”

(Additional reporting by Monika Pallenberg)

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