Sunny German economic data shines on incumbent chancellor

14th August 2009, Comments 0 comments

With just over six weeks to go until the September 27 poll, the federal statistics office said Germany had achieved second-quarter growth of an unexpected 0.3 percent on the first quarter -- the first uptick in a year.

Berlin -- Chancellor Angela Merkel won a boost Thursday in her bid for re-election as data showed Germany has emerged from recession faster than forecast but analysts warned a full recovery would take time.

With just over six weeks to go until the September 27 poll, the federal statistics office said Germany had achieved second-quarter growth of an unexpected 0.3 percent on the first quarter -- the first uptick in a year.

It also adjusted the GDP figure for the first quarter, saying it dropped 3.5 percent versus 3.8 percent announced earlier.

"The German nightmare is over, the worst recession since World War II is history," Unicredit bank declared.

Merkel was upbeat late Thursday, saying the worst was behind the country.

"We can perhaps say that the decline is over," she said on television. "We had reached rock bottom and we now perhaps have the first signs of recovery."

But Merkel stressed there was still work to be done, saying the figures compared to those of 18 months earlier were "quite bad enough," adding: "that is why the crisis is not over."

The upturn caught analysts by surprise as they had forecast a 0.2-percent drop of GDP in the second quarter.

But economists warned that although the data indicated the economy was no longer in reverse, its underlying weaknesses could be exposed when state stimulus money dries up.

Merkel's government was quick to claim credit for the latest "green shoots".

Popular Economy Minister Karl-Theodor zu Guttenberg from Merkel's conservative Christian Union bloc said this was "due to our quick and decisive action," including two stimulus packages worth 81 billion euros (115 billion dollars) and a cash-for-clunkers programme to jumpstart car sales.

But he too warned against "euphoria" over the latest data.

Merkel's Christian Union bloc was already flying high in the polls ahead of the September 27 poll with a double-digit lead over its chief rivals, the Social Democrats (SPD), junior partners in her unwieldy "grand coalition".

With the economy shaping up to be the driving issue of the campaign, analysts said Thursday's news would clearly benefit the chancellor.

"If voters assume that the government had something to do with the recovery than it is Frau Merkel who will be able to take the credit," political scientist Nils Diederich of Berlin's Free University told AFP.

SPD chancellor candidate Frank-Walter Steinmeier, the current vice-chancellor and foreign minister, has struggled to portray Merkel's economic policies as "aimless" and commentators said Thursday's good news would make that task even more difficult.

His "Plan for Germany" presented last week pledging four million new jobs by 2020 drew howls from analysts and commentators who compared it to communist East Germany's five-year plans.

The head of independent polling institute Emnid, Klaus-Peter Schoeppner, said German voters consider the conservatives to be far more competent on economic policy than the SPD.

"If anyone is going to get a boost from the recovery it is the Union," he told AFP. "The SPD has not managed to find a single issue that would even mobilise its own voters, let alone voters in other camps."

The statistics office said the return to growth was due to "positive momentum from personal and public expenditure as well as the building sector."

Neighbouring France appeared to be emerging from the recession as well, according to data released Thursday, also posting growth of 0.3 percent in the second quarter.

The data came a day after the US Federal Reserve edged a step closer to acknowledging a recovery as it announced it would scale back a massive effort to pump liquidity into the financial system and keep its base interest rate near zero.

Several analysts said that while the latest news was positive for Germany, the country was not out of the woods yet.

"The free fall may be over but nothing more than that," economist Gustav-Adolf Horn told the online service of Focus newsweekly, adding that a full rebound could not be expected until 2011.

"The road to recovery will be long and bumpy," said the German Chambers of Commerce and Industry.


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