German economy on mend - economist

Deutsche Bank chief economist Norbert Walter said in an interview that the German economy was beginning a tentative recovery.

"I'm not convinced by the talk in recent months of Germany being the sick man of Europe because it's not growing at hoped-for rates. Having said that, we shouldn't expect Germany to become the locomotive of Europe again soon," Walter told financial daily, Il Sole 24 Ore.

"We are already accelerating, albeit in a year which is very difficult to interpret," he said.

Exports, benefiting from euro weakness, would be the prime motor of growth but that effect would only be felt strongly from 2000, Walter told the Milan-based newspaper.

"Only at the end of 2000 will we realise that 2000 and 2001 will be capable of posting growth between 2.5 and 3.0 per cent."

The German economy grew 2.3 per cent in 1998 and the government's official forecast is for 1.5 per cent this year, though some officials have said it could go a little higher.

Asked about the euro, which got a brief boost last week when European Central Bank (ECB) President Wim Duisenberg said a monetary tightening bias was "creeping into our (the central bank's) considerations", Walter said he approved of the ECB's new tone.

The European Central Bank will not raise its interest rates to protect the euro, which has come under heavy pressure in the past few weeks, a Spanish member of the bank's board said yesterday.

Eugenio Domingo Solans told the Spanish newspaper El Mundo: "The European Central Bank will not raise rates to defend the euro. Neither money supply nor inflation forecasts warrant the conclusion that we have to modify the present interest rate level."