Growth and resilience - the German government's 2011 spring forecast
Speech by the Federal Minister of Economics and Technology Rainer Brüderle at a press conference to unveil Germany's 2011 spring forecast
Berlin, Federal Press Conference
The spoken word is final!
Ladies and gentlemen!
Springtime is the season for new growth and strength.
Germany's economy is continuing to grow strongly.
The economic upswing is on a solid footing and is continuing to spread across the economy.
For 2011, we expect GDP to grow by 2.6 per cent.
With this, we are building on the success of the record year 2011.
The economic upturn in Germany is stable.
Eighteen months of our current government coalition show:
The economic policy of the coalition between the CDU/CSU and the FDP is a success.
The coalition's economic policy is guided by reasonable considerations and clear aspirations.
The prospects for 2012 remain favourable.
For next year, we expect growth of 1.8 per cent.
One image illustrates the situation very well: the upswing is like a good braided Easter bread.
The longer the braid, the wider and thicker it gets.
This is particularly reflected by the success on the labour market.
The labour market continues to strike new records.
Full employment is no longer only something to be found in history books.
In some regions, we have already achieved full employment.
In Bavaria and Baden-Württemberg, unemployment stood at about 4 per cent in March.
For 2011, we expect a national unemployment average of 6.9 per cent.
With this, we will fall below the three million mark.
The number of gainfully employed people will continue to grow.
We expect an increase by 390,000 this year.
This brings gainful employment to 40.9 million people.
There has never been such a high number of gainfully employed people in Germany.
According to our estimates, this number is likely to rise by another 240,000 people in 2012.
Gainful employment in 2012 would then amount to 41.1 million.
The former trends on the labour market are now reversed.
In some regions, many vacancies can no longer be filled.
The shortage of qualified workers is increasingly putting a brake on prosperity and growth.
Germany needs to harness its potential.
We are eliminating employment barriers for older workers.
We need a better balance between work and family life.
We will considerably increase the expenditure for education and research.
At the same time, we welcome the immigration of high-skilled workers to Germany.
As of 1 May, freedom of movement will be granted to workers from Central and Eastern Europe.
Germany is looking forward to the brain gain.
I have counterparts in Eastern Europe who worry about a brain drain in their countries.
My objective is that German companies will be able to employ top experts from all over the world without any bureaucratic hurdles.
Germany needs high-skilled immigration.
Positive achievements on the labour market are boosting domestic demand.
The upswing is driven by the domestic market.
Domestic demand already made up two thirds of the record growth in 2010.
In 2011 and 2012, over eighty per cent of the expected growth will be generated by domestic consumption.
As you can see, this is a classic economic cycle.
Exports jump-started this development.
Consumption and investments are following suit.
The upward spiral is at full throttle.
Some of you will remember: one year ago, the SPD Chairman spoke of a downward spiral and rising unemployment.
There is not the slightest sign of that happening.
We are in an upward spiral.
Hard work and performance are now rewarded again.
People have more money in their pockets again.
Household disposable income will rise by 3.3 per cent this and next year.
This is the highest growth rate in a decade.
The upswing is reaching the population.
And also the German government's tax relief measures are taking effect.
For example, various legislation - including the Growth Acceleration Act - brought tax relief to the tune of approximately 24 billion euros last year.
People are regaining confidence in the future.
This is reflected by consumer spending.
It is expected to grow by 1.3 per cent this year in real terms.
For next year, we expect an increase of 1.5 per cent in real terms.
However, we should avoid becoming overconfident.
Our 2.6 per cent projection is more cautious than other forecasts.
Some forecasts, for example, put a three before the decimal point.
The joint diagnosis by economic research institutes stands at 2.8 per cent.
We continue to apply our tried and proven cautious approach.
If things are going better than expected, we will be happy to make upward corrections.
We must continue to lay the foundations for sustainable growth.
We are doing this by consolidating public-sector budgets and phasing out temporary stimulus measures.
We are making the phase-out of hard-coal subsidies irreversible.
We have launched a resolute austerity budget.
We are gradually getting a grip on our budget deficit.
You can see that we are now bringing it below the 3 per cent ceiling.
I found it interesting to read the economic research institutes' plea as expressed in their Joint Economic Forecast.
"Inflation-related tax increases must be avoided".
This means: people earn more when the economy is booming.
But they are losing a disproportionate share of their disposable income due to the fiscal drag.
This is nothing but a tax increase. We must take action to eliminate this.
This certainly requires smart counter-financing.
I see some cost-savings potential, for example, in the Federal Employment Agency.
The excellent developments on the labour market allow us to cut some costs there.
Labour Minister von der Leyen has already put some initial proposals on the table.
This is a very good starting point.
But we can do more, for example in the area of advanced education and training measures.
We could also think about developing some form of debt rules for the Federal Employment Agency like the ones that we have defined for the Federal budget.
This shows you: The coalition is consolidating the budget.
The coalition wants to bring genuine relief.
Others want to steer in the opposite direction: more government, more taxes and more debts.
The plans of the SPD reflect this policy and propose a mandatory insurance fund for citizens.
This would make labour much more expensive.
Ultimately, this would jeopardize jobs.
Ladies and gentlemen,
We are making Germany fit for the future.
At the same time, we are taking public concerns seriously.
For example, I am thinking of some people's fears of inflation.
Price stability is a valuable asset.
In the short term, I do not see an imminent threat of inflation.
We are expecting a rise in prices of 2.4 per cent in Germany this year.
Energy costs are the main cost driver.
In our forecast, we assumed an annual average price of 115 US dollars per barrel of crude oil for 2011.
This is about 45 per cent higher than last year's average oil price.
Ladies and gentlemen,
There are some positive trends.
Recent collective bargaining negotiations have shown that people are acting responsibly.
On the one hand, employees' legitimate wage claims are at stake.
On the other, costs for companies must not be get out of hand.
This shows that we currently do not need to fear any so-called "second-round effects".
But still, we need to be alert.
Public expectations of inflation have also risen noticeably.
In part, this is due to the strong increase in global liquidity.
In my view, the ECB did the right thing last week in raising the key interest rate from 1.0 to 1.25 per cent.
In Germany, the stability of our currency is part of our raison d'etat.
This is also a question of social equity.
Let my say very clearly: Solidarity must not be a one-way street.
I am also saying this with regard to Portugal.
Portugal's competitiveness needs to be substantially strengthened.
This is one of the main causes of the country's current plight.
Portugal needs a strict plan to consolidate its public budgets.
Allow me to say a few words with regard to Japan:
Germany and Japan's real economies are not very closely intertwined.
The aftermath of the disaster in Japan has therefore only a limited impact on our economy.
Germany's exports to Japan account for 1.4 per cent of total German exports and imports from Japan make up slightly over one per cent.
This reflects a fairly low level of economic interdependence.
Even if the crisis were to spread further, our economy would be strong enough to weather the repercussions.
We wish our Japanese partners and friends well through these hard times.
As you can see: Germany is a reliable and strong partner.
Germany stands on a firm basis.
Germany has power and stamina.
We are using our economic strength worldwide to foster positive effects.
We are an anchor of stability.
In our projections, we have assumed global trade to reach 6.5 per cent growth in 2011 and 2012.
We expect German exports to rise by around 7.5 per cent this year.
We estimate that next year's figure will be 6.5 per cent.
Our global trading partners also benefit from our strength as an exporter because most of our exports require imports.
For example, we need raw materials.
One can roughly say: 100 euros in export goods require 40 euros in imports.
Germany is a key driver for growth.
This should not be overlooked when calling for measures to further strengthen domestic demand.
We do not need a fixed target for our trade balance.
Our companies are highly competitive without outside assistance.
It is the companies' innovative capacity and range of products and services that determines their success in global markets.
It is gratifying to see that this is also reflected by the volume of investment in machinery and equipment.
This year, it has seen a marked growth of 10.7 per cent.
For next year, we also expect strong investment in machinery and equipment totalling 8.8 per cent.
This shows that German companies are themselves laying the foundation for a sustainable upswing.
Ladies and gentlemen,
As you can see: this is a good development.
Germany is moving at a swift pace on the road to economic recovery.
By 2015, we expect to achieve an average real growth rate of 1.8 per cent per year.
This is the result of successful economic policy making.
Manufacturing is on the rise.
Investments are on the rise.
Employment is on the rise.
The upswing is well on track - as are our economic policy and its Minister.