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Germany faces tough choices

By Batuk Gathani

Brussels Oct. 13. Though the German unemployment rate has marginally fallen, nearly 44 lakh persons remain unemployed and live off on social security handouts.

The investment flows are rated as `poor' and the "locomotive economy" of the European continent is facing the prospects of zero growth this year. The Government may admit later this month — what has been predicted long ago — that the economy has stagnated and may not report even modest growth until next year.

It is in this background the European economies generally and the Euro zone economies particularly face tough decisions in coming weeks to boost confidence, investment flows and reverse the high unemployment trends. The European Commission confirmed that the Euro-zone's economic growth contracted earlier this year but predicted modest recovery in the third and fourth quarters. This prediction is based on the prospects of external demand reviving in the U.S. and Japan. But in the final second-quarter figures, the Euro stat (European Commission's statistical agency) states that the Euro zone's GDP fell by a fraction of a per cent. Hence, later this year the European governments have to take key decisions to restore health and vigour to the economies.

Next week, the German Parliament will vote on epoch-making proposals that would cut federal and local taxes and curtail generous and unaffordable unemployment benefits.

The strategy is to drastically improve productivity and maintain the competitive edge in the global market place.

It is also argued that a modest but consistent global economic recovery may boost German export and import volumes.

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