Bundesbank says reforms must go deeper

 
15 March 2004

FRANKFURT – Germany’s central bank told the Berlin government on Monday that deep-reaching reforms, coupled with sound fiscal policy, were still needed to get the country’s economy growing again.

In its monthly report for March, the Bundesbank used the term “crisis-like” to describe Germany’s public-sector finances, but said the prospects for reforms had clearly improved.

“The reform process must not get stuck,” the Bundesbank said. Further consolidation of the public budget, tax cuts and a reform of the social welfare system were now needed.

The Bundesbank did say that progress had been achieved.

“Along with the equally urgent reforms in the labour market, favourable conditions for sustained economic growth and for boosting the affluence of society have been created,” the central bank said about the reforms set in motion by the Berlin government.

But the Bundesbank said Germany’s economic problems could not be wholly blamed on a weak economic climate, but were also structural.

Coinciding with the central bank report, a leading economic institute, the IFW in Kiel, also said the German government reforms must continue.

The IFW said it expects 1.6 percent growth for Germany this year, whereby 0.6 percent of that would be the result of several more working days than in 2003. The figure is down from the IFW’s previous 2004 projection of 1.8 percent growth.

The Kiel institute – one of Germany’s six leading independent economic think tanks – said that the government reforms had not yet gone far enough to spur the economy.

DPA
Subject: German News