Germany's six leading economic institutes yesterday dampened hopes of a rapid recovery in Europe's largest economy, predicting an upswing in 2005 at the earliest.
The economy will grow by 1.7 per cent in 2004, compared with zero growth this year, the institutes said in their closely watched semi-annual report.
They said that a part of next year's expected recovery - 0.6 percentage points - would derive solely from several additional working days in 2004, as an unusually large number of public holidays fall on weekends.
Mr Gebhard Flaig of Munich's Ifo institute said: "In real terms, growth will only be 1.1 per cent. One can hardly talk of an upswing." In harsh criticism of Chancellor Gerhard Schröder's Agenda 2010 economic reform programme, the institutes said the "half-hearted measures" introduced this year would not be sufficient to fuel long-term economic growth rates above 2 per cent.
A qualitatively different set of more radical and far-reaching reforms would be necessary to prevent an absolute fall in living standards in Germany in the next 10 years, Mr Joachim Scheide of Kiel's IfW institute said.
"For a rich country like Germany such a fall would be extremely serious. But some people are already experiencing this," he said. Reforms to labour market and business regulations, and cuts taxes were all necessary.
Mr Schröder's programme was a "step in the right direction", but lacked coherence and a clear set of priorities, the institutes said.
Average unemployment next year would rise to 4.45 million from 4.39 million this year despite the labour market measures in Agenda 2010 because "the main causes" of the record jobless levels had yet to be tackled.
Mr Schröder indicated yesterday that the government would reduce its growth projection of 2 per cent for next year when a new estimate is published tomorrow. He said he was "sceptical" that growth would exceed the institute's 1.7 per cent projection.
It was unclear whether economic weakness would reappear in 2005, Mr Flaig said, adding that a fall in the dollar would dampen the recovery by reducing exports.
