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Economy suffered from worst post-war recession in 2009

According to provisional figures released today, Europe's largest economy shrank by five percent in 2009, its worst result since the end of World War II. Its key export sector plunged by more than 14 percent.


AFP - Germany suffered its worst recession since World War II last year when Europe's largest economy contracted by five percent, provisional official figures released on Wednesday showed.

The economy "shrank in 2009 for the first time in six years," as its key export sector declined by 14.7 percent and business investment plunged by 20 percent, the Destatis national data service said in a statement.

Economic activity had expanded in 2008 by 1.3 percent, and the central bank has estimated it should grow again by 1.6 percent this year.

"The economic slump occured essentially during the winter period of late 2008 and early 2009," Destatis president Roderich Egeler told a press conference. Business activity then "stabilised at a low level."

The government also posted a public deficit of 77.2 billion euros (112 billion dollars) last year, around 3.2 percent of output, after managing to balance its accounts in 2008, the data showed.

"The deterioration of public finances has been much more limited than in most other eurozone countries," ING senior economist Carsten Brzeski noted.

The European Union's Stability and Growth Pact holds EU members to public deficits of no more than 3.0 percent of gross domestic product (GDP), and it was the first time in four years that Berlin exceeded the limit, Destatis said.

It is to release final growth figures on February 12.

This year, the finance ministry has estimated the deficit will exceed 5.0 percent of GDP, as the government seeks to boost the economy with strong stimulus measures that include tax cuts.

Government spending jumped by 2.7 percent in 2009, Destatis said, while household consumption gained a slight 0.4 percent.

German authorities have approved a stimulus package worth up to 21 billion euros in 2010, including 18 billion euros in tax relief for private households that should underpin consumer spending.

The country's export-oriented economy took a hit from the global economic slowdown but is also set to benefit from fresh emerging market demand for capital goods such as machine tools and chemicals used to produce finished products.

Brzeski commented on 2009's five-percent contraction by saying: "This was hopefully the last reminder of the severity of the recession."

The economy ministry was upbeat regarding the data, saying the worst had passed.

"It is particularly welcome that the labour market has remained surprisingly resistent," Economy Minister Rainer Bruederle said in a statement.

Unemployment has been limited by Germany's short-time work scheme under which the state subsidises shorter hours for workers to avoid widespread layoffs.

The number of jobless is nonetheless expected to reach more than 3.8 million people this year, after averaging 3.42 million, or 8.2 percent of the workforce, in 2009.

Brzeski warned the economy had to be rebalanced from a dependency on exports "towards more domestic driven growth," and concluded: "Not everything is hunky-dory."

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