German Economists See Zero Growth, More Jobless
A Christmas shopping flurry belies toughest times since World War II
GERMANY is experiencing some of its toughest times since the end of World War II, but the scene here in the trendy Kurfurstendamm shopping district these days gives no indication that Germans are feeling the economic squeeze.
The Christmas season is in full swing and people seem to be spending freely. Sidewalks are packed and department stores are jammed.
A festive backdrop to the shopping frenzy only strengthens the impression that the German recession exists only in the minds of the nation's politicians and economists. Brass bands serenade shoppers during the day, while a traditional Christmas market near the Kaiser Wilhelm Memorial Church offers hot sausages and drinks for adults and carnival rides for kids. And at night, the district is illuminated with lights strung up in the trees.
``We aren't experiencing a problem with people not wanting to spend money during the Christmas season. We can't see a difference with sales this year compared with previous years,'' says Monika Jarju, a salesperson at the Strunkmann & Meister bath and linen store.
It is much the same story in other major German cities. In Cologne, for example, retailers are generally satisfied with the pace of Christmas sales, according to local news media reports.
But Ms. Jarju and others were quick to caution that the Christmas season does not provide an accurate gauge of the state of the nation's economy. In Germany, they explain, Christmas is such an important holiday, that a significant number of Germans are willing to spend more than they can really afford.
``It may be good now,'' Jarju says, ``but during the rest of the year we noticed that business was not good.''
Retailers hope 1994 will bring better times. But experts are divided on whether to expect an economic upturn next year.
Five of the nation's six top economic institutes are predicting slow growth in 1994, featuring a 1.5 percent rise in gross domestic product for all of Germany, compared to a 1.5 percent drop in GDP this year. Western Germany would see about 1 percent growth, after a 2 percent drop this year. In formerly communist eastern Germany, which is struggling to overcome four decades of totalitarian mismanagement, GDP should rise by 7 percent in 1994, following a 6 percent increase this year, according to the think-tanks' projections.
Economic growth would be achieved largely by increased government spending, meaning a slightly higher federal budget deficit. The institutes predict the federal deficit will climb from about 107 billion deutsche marks ($64 billion) this year to roughly 110 billion DM ($66 billion) in 1994.
The sixth institute, the DIW in Berlin, is painting a more depressing picture. It says GDP should drop half a percentage point in western Germany, and the GDP increase in the east should be limited to 5 percent.
A government advisory council of economists, known as the ``five wise men,'' predicts the economy in western Germany will see zero growth next year.
Economic stagnation in the west will, in turn, slow investment in eastern Germany's recovery. That will cause a significant rise in unemployment. Indeed, the ``wise men'' say Germany could see unemployment levels rise to 4 million, or 10 percent, next year.
Companies are taking necessary steps to regain international competitiveness, but the price is layoffs and other cost-cutting measures, says Siegfried Utzig, an economist at the Union of German Industry.
``This will improve the situation for companies. But it will not bring back domestic demand,'' Mr. Utzig says.
The Bundesbank, the German central bank, remains a proponent of tough anti-inflationary policies. Bundesbank chairman Hans Tietmeyer spoke out recently against significantly lowering German interest rates to jump start the economy.
That is bad news for workers. German trade unions, once seemingly omnipotent, now appear to have their backs against the wall. IG Metall, one of the most influential German unions with more than 3 million members, has been losing about 20,000 members a month lately due to layoffs.
The fear of further layoffs forced IG Metall to agree recently to a proposal made by the automaker Volkswagen to introduce a four-day work week, along with a roughly 10 percent cut in pay. If the union had not agreed, Volkswagen officials said the company would have laid off 30,000 of its 100,000 employees.
The harsh corporate austerity measures, combined with a weakening of the mark, means that Germany's exports should slowly start to rise, business officials say.
Figures released last Friday appear to confirm this trend. October industrial orders stabilized, due mainly to growth in foreign demand. But unemployment surged to a post-unification high of 7.8 percent in November. Seasonally adjusted figures showed nearly 2.5 million were out of work, up from 2.46 million in October.
``I am worried that in 1994 we will have more problems,'' says Jarju, the Kurfurstendamm salesperson.