Update: Merkel: Germany Cannot Decouple From Global Slowing
–Adds Remarks By Economics Minister Roesler To Story Sent 09:40 GMT
BERLIN (MNI) – German Chancellor Angela Merkel said Tuesday that
the outlook for Germany and Europe is uncertain and that the German
economy will not be able to decouple from the global economic slowdown.
“Germany is not an island, it cannot decouple from the rest of the
world,” Merkel said in a speech at a conference organized by the German
Industry Association (BDI).
Economics Minister Philipp Roesler, speaking at the same
conference, said Germany’s export-dependent economy will be hit by
slowing global growth. Moreover, the uncertainties regarding the
Eurozone debt crisis “will impact the growth expectations for 2012 and
2013,” he warned.
Merkel said it will still take a long time before the debt crisis
is fully overcome. “There is still distrust in financial markets about
whether the Eurozone countries will be able to service their debt over
the long term,” she noted.
Roesler cautioned that there is “no easy exit” from the crisis via
central banks, and he warned of the risk that the European Central
Bank’s new bond-buying program, the OMT, could lead to higher inflation.
Merkel rejected calls for Germany to allow unit labor costs in the
country to rise in order to reduce imbalances in the Eurozone. Rather,
other Eurozone member states need to lower their unit labor cost, she
German tax revenues are currently developing “very favorably,”
Merkel noted. The country’s total budget deficit will likely amount only
to 0.9% of GDP this year, she said. The government is aiming to reduce
federal net new borrowing to zero by 2016 at the latest, she said.
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