Joint Economic Forecast Autumn 2011 - The European Debt Crisis Affects German Economy
ResearchIn the summer of 2011, the outlook for the global economy clearly deteriorated. Especially the sovereign debt crisis is threatened to turn into a bank crisis among Europe. This is increasingly affecting the German economy. The grown insecurity will put at risk domestic demand, and foreign trade might stop contributing to the expansion due to the difficult situation of important trading partners.
The institutes expect that the German Gross Domestic Product (GDP) will increase by 2.9 per cent this year and by only 0.8 per cent the following year. The unemployment rate should decrease merely from 7.0 to 6.7 per cent in 2012. The inflation rate of an estimated 2.3 per cent in 2011 and a 1.8 per cent in 2012 will increasingly be determined by the domestic price upswing. The state budget deficit will decrease to 0.9 per cent in relation to the GDP this year and to 0.6 per cent the next year. The main risk consists of an intensification of the European debt and confidence crisis, due to which the financing situation for the economy could clearly deteriorate. The European economic policy so far has focused on preventing the insolvency of a member state under any circumstances. Instead it should create a functioning insolvency mechanism for states and a European procedure for recapitalization, and if necessary, an orderly bankruptcy procedure for banks.
Press Release (only available in German)
The Joint Economic Forecast Group consists of
Halle Institute for Economic Research (IWH)
in co-operation with:
ifo Leibniz Institute for Economic Research at the University of Munich
in co-operation with:
KOF Konjunkturforschungsstelle at ETH Zurich (Business Cycle Research)
Kiel Institute for the World Economy
for the medium-term forecast in co-operation with:
Centre for European Economic Research (ZEW) Mannheim
in co-operation with:
Institute for Advanced Studies, Vienna
For further information please contact
Dr. Marcus Kappler, Phone +49 621/1235-157, E-mail kappler@zew.de