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Germany: Economic Growth Likely To Accelerate

  • Roland Eggleston



The European Union's most powerful member, Germany, is apparently on the road back to economic growth after several sluggish years. RFE/RL correspondent Roland Eggleston reports from Munich.

Munich, 10 December 1999 (RFE/RL) -- Germany's economy is beginning to perk up out of its doldrums. At the same time, the center-left coalition government led by Gerhard Schroeder is becoming more confident, after its rocky first year.

The combination, German political analysts say, is good news -- for more than just Germany. One political commentator, Juergen Pohlmann, says: "It goes too far to say that what is good for Germany is good for Europe. But it is certainly true that an economically and politically strong Germany improves the international standing of Europe as a whole."

In particular, economists hope that expected improvements in the German economy will lift the standing of the new European currency, the euro, which has plummeted more than 15 percent against the dollar since it was introduced a year ago for exchanges between banks. It will become the common currency for 11 European countries -- including Germany, France, Italy and Austria -- in the year 2002.

German Finance Minister Hans Eichel has said repeatedly that a stable German economy is essential for the success of the euro, because Germany alone represents 30 percent of the euro-zone economy.

The upbeat approach follows two developments. One was this week's prediction by the Organization for Economic Cooperation and Development (OECD) that economic growth in Germany would accelerate in the next two years, helped by increased exports and business investment.

According to the Paris-based OECD, the German economy will expand 1.3 percent this year, around 2.3 percent next year and 2.5 percent in the year 2001. German experts agree with those findings and point out that there are already signs that the long period of slump is coming to an end. Last month, unemployment fell to its lowest figure in three years as exports expanded.

This was good news for Chancellor Gerhard Schroeder and his coalition of Social Democrats and Green environmentalists. The coalition government's first year in office has been marred by internal party problems. And public bitterness about the government-sponsored austerity program led to severe losses for the Social Democrats in all five provincial elections this year.

But at this week's Social Democratic congress, the economic news helped Schroeder take full control of his party, for the first time this year. In the election for party chairman, he won more than 85 percent of the vote -- 10 percentage points more than in the last election. The party also gave strong support to the economic program pushed through by Schroeder and Eichel.

The chancellor even persuaded the party congress to reject leftist demands for a tax on the wealthy and the middle class, which leftists said would restore "social justice" in Germany. Instead, he won approval for another plan that includes taxes on savings and the closing of loopholes used by the very wealthy to avoid taxes.

The new confidence shown by Schroeder and his government is helped by the problems facing the opposition Christian Democratic Union (CDU), which led Germany for 16 years under its formidable chairman Helmut Kohl. Once respected as Europe's foremost statesman, Kohl has seen his reputation crumble over the last month, with revelations that he used secret bank accounts to distribute large sums of money contributed to the party.

Kohl's secret accounts appear to breach laws on the financing of political parties which were introduced after a scandal in the 1980s. Such infringements could cost the party millions of dollars in fines. But far more damaging are the suggestions in the German press that some of the money may have been used for dubious international financial deals. There have also been suggestions that some of the money may have been contributed in return for political favors. The truth is now being sought by a parliamentary commission, which expects to take two years to complete its investigations.

The present leadership of the CDU has vigorously denied any connection with what is now commonly called the "Kohl system." But opinion polls indicate that the party has suffered. As for Kohl, there are growing demands that he should surrender his seat in the federal parliament and give up his honorary, but influential, posts in the CDU leadership. German political commentators say Schroeder can only watch with satisfaction as his political opponents wrestle with these problems. With important provincial elections coming in Schleswig-Holstein in February and North Rhine-Westphalia in May, questions about the integrity of the CDU can only help the chancellor.

And the improvement in the economic news is also a welcome election aid.

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