Germany 'well positioned' to withstand crisis

Germany is well positioned to withstand the turmoil in global financial markets and talk of a looming recession is irresponsible…

Germany is well positioned to withstand the turmoil in global financial markets and talk of a looming recession is irresponsible, German Finance Minister Peer Steinbrueck said today.

The German economy shrank 0.5 per cent in the second quarter - the first contraction since 2004 - and several leading economists expect that to continue in the July-September period.

"It is completely irresponsible for some pessimists to proclaim, on the basis of just one single quarter of slightly negative growth, that the spectre of recession is looming," Mr Steinbrueck said in a speech to a Chinese business audience.

Mr Steinbrueck said a series of economic reforms introduced in recent years had helped make the German economy more resilient.

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While rising global food and raw materials prices as well as a downturn elsewhere were set to leave their mark on German growth and consumption, Steinbrueck insisted the economy's medium-to long-term outlook was sound.

"Compared with a few years ago, our economy is in a far better position to withstand the current turbulence on financial markets," he said.

Steinbrueck had said that he was sticking to his forecast for German economic growth of about 1.7 per cent this year despite mounting warnings from economists.

The Organisation for Economic Cooperation and Development cut its 2008 full-year growth forecast for Germany yesterday to 1.5 per cent from its previous estimate of 1.9 per cent.

"The medium to long-term prospects for my country's economy are substantially better than the current short-term view would suggest," Mr Steinbrueck insisted in today's speech.