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Bundesbank sees weak growth
FRANKFURT, Germany -- Economic growth in Germany stalled in the third quarter as Europe's largest economy struggles to recover from a bout of recession amid a bulging budget deficit and rising unemployment. The Bundesbank said on Monday that gross domestic product grew by just 0.25 percent between July and September, compared to 0.3 percent expansion in the previous two quarters. Weak growth in the third quarter brings year-on-year expansion at 1 percent, the Bundesbank said in its November monthly report.
"The German economy in the summer months has continued on the moderate growth path that it entered at the start of the year after overcoming the contraction phase of the second half of 2001,'' the Bundesbank said. "We cannot see an end to investment hesitancy.'' And the central bank placed much of the blame for the sluggish economy at the feet of the government, saying the newly elected coalition led by Chancellor Gerhard Schroeder was not acting aggressively enough to spur growth. Schroeder is considering raising capital gains tax and plugging exemption holes that apply to equity and real estate investments, while at the same time reducing public spending. "It [the government] should be investigated whether there shouldn't be a stronger use of measures that predominantly touch consumptive government spending, rather than the primary investment activity crucial to long term growth perspectives,'' the bank said. Germany -- once the engine of the European economy -- slid temporarily into recession in the second half of last year. It has been sputtering to regain growth as the global slowdown continues to dent exports, reduce prices for products and cut into corporate profits. At the same time, as stock markets plunge, many companies have had to accelerate spending cuts and layoffs -- pushing Germany's employment rate to almost 10 percent. The government has revised its 2003 budget deficit to nearly 19 billion euros and has run afoul of the European Union for exceeding the deficit ceiling for eurozone members of 3 percent of GDP. The Bundesbank's estimate of GDP expansion is a preview to the government's own growth numbers to be released on Thursday. Analysts polled by Reuters expect the government figure to show 0.3 percent quarter-on-quarter growth between July and September.
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