German economy 'has bottomed out'

European Central Bank Governing Council member Axel Weber had said the German economy had bottomed out, but warned that the financial…

European Central Bank Governing Council member Axel Weber had said the German economy had bottomed out, but warned that the financial crisis may not be over yet.


Mr Weber's comments chimed with remarks by fellow ECB Governing Council member Erkki Liikanen, who had said on Wednesday that financial markets are in a better situation now than they were before the collapse of US investment bank Lehman Brothers last September.

"I warn against prematurely declaring the financial crisis to be over," Mr Weber told the Sueddeutsche Zeitung newspaper in an interview to be published tomorrow, adding however that the economy had passed its low point.

The German economy grew unexpectedly in the second quarter, posting a surprise 0.3 per cent expansion that has boosted hopes of recovery in the wider euro zone.

Mr Weber said the economy could do better than expected in the following quarter as financial rescue packages and economic stimulus plans take effect, possibly leading him to revise upward forecasts for a 6 per cent contraction this year.

Worries over the availability of credit to the private sector, which industry and small- and medium-sized firms have cited as a hindrance to recovery, are misplaced, Mr Weber said.

"There is no credit crunch," he told the newspaper, adding that he was confident commercial banks would heed the ECB's call for continued active lending.