Berlin (AFP) – The outlook for the eurozone darkened Thursday as top think tanks slashed their forecasts for German growth — traditionally the bloc s economic engine — both this year and next.
And the institutes urged the German government to abandon its austerity mantra and boost public spending to kick-start growth, just as a number of countries led by France have long argued, and as a new showdown on economic policy in the eurozone looms.
The four institutes — Ifo in Munich, DIW in Berlin, RWI in Essen and IHW in Halle — predicted in their widely-watched half-yearly report that the German economy would grow by just 1.3 percent in 2014 and 1.2 percent in 2015.
That is much lower than the 1.9 percent and 2.0 percent they had previously expected.
And they argued instead of always trying to balance its books, Berlin should ramp up investment in the public sector as a way of reigniting the flagging economy.
German rail operator Deutsche Bahn displays on of its trains at a transport trade fair in Berlin
“Economic growth in Germany has cooled noticeably,” said the institutes, whose reports are used by the government as a basis for its own economic forecasts.
Chancellor Angela Merkel said Berlin had “taken note” of the downgraded forecasts.
“They don t come as a surprise, because overall economic forecasts have clouded over somewhat,” she said.
Earlier this week, both the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) warned about a loss of momentum in the eurozone recovery as the German economic engine stalled.