Germany Economic Recession - Germany and the worsening recession and the huge bank losses

Germany, the first economy in Europe, the accumulated bad news Wednesday that presage a tough 2009: a worsening recession in the fourth quarter of 2008 and a loss of almost 4,000 million euros in the first bank in the country, the Deutsche Bank.

"Germany living its worst economic period in decades. It is a situation where are useless books economy," he admitted on Wednesday the head of the German Government, the conservative Angela Merkel in a speech to the Bundestag, the camera Lower House.

Merkel spoke before the parliament shortly after the Federal Bureau of Statistics (DESTATIS) disseminated an estimate that the Gross Domestic Product (GDP) German lost between 1.5% and 2% in the fourth quarter of 2008 in relation to third .

This figure represents a worsening of the recession in the first European economy technically came last fall, after two consecutive quarters of falling GDP.

Moreover, according to provisional data on DESTATIS, Germany's GDP grew by 1.3% in 2008, clearly slowed from previous years, given that in 2007 grew by 2.5% and 3% in 2006. By 2008, the Government had opted for a growth of 1.7% and 1.4% economists.

A bad macroeconomic news on Wednesday joined the announcement by the country's largest bank, Deutsche Bank, which estimated its net losses in 2008 at 3900 million.

The financial crisis and the weakening of the global environment "and were felt in 2008," said Economy Minister Michael Glos conservative.

Specifically, exports, the engine of German growth, sank, and industrial applications in November, while industrial investment also suffered a serious slowdown.

Consumption stagnated and unemployment reduction failed to offset the rise in prices during the summer due to the sharp rise in oil prices in that period.

"I am confident that the package of economic measures (decided on Monday by the government) will impact significantly on the economy this year," said Glos.

That package, a sum of 50,000 million dollars in two years and regarded as the most important since the Second World War, provides a strong program of investment in infrastructure, as well as reductions in taxes and contributions.

Because of that plan, the German budget deficit to exceed 4% of GDP in 2010, said Finance Minister Peer Steinbrück, in statements to the Financial Times Deutschland.

This forecast assumes the failure of the Stability and Growth Pact of the EU, which sets the ceiling to below 3% of GDP.

In addition, the plan was greeted with reluctance by the employer, considering its entry into force in late July and too weak tax reductions.

These criticisms, however, impideron not recognize the German chancellor to the Bundestag that the adoption of the plan was "the most difficult political decision taken as chancellor."

But given the exceptional dimension of the crisis, "such a response was necessary, because doing nothing would have been worse," admitted.

The announcement of the contraction in GDP in the fourth quarter, moreover, is the last piece of a sad series of economic statistics for Holger Schmieding, chief European economic division of the Bank of America.

In this context, Schmieding felt that the European Central Bank (ECB) has no choice but to cut for the fourth consecutive time guideline rate at its meeting on Thursday, from 2.5% to 2%.