The World from Berlin German Economic Success 'On Shaky Ground'

http://www.spiegel.de/international/germany/0,1518,808758,00.html

Though new statistics released on Wednesday showed strong economic growth in Germany for 2011, a slight contraction at the end of the year has prompted fears that Europe's largest economy could experience a recession this year.

Averaged throughout the year, growth of gross domestic product (GDP) was a "very robust" 3 percent. But the Federal Statistical Office's preliminary estimate for the final quarter registered a foreboding 0.25 percent contraction. Economists have warned that the shrinkage was likely to continue into the first quarter of 2012, but many are still optimistic that Germany will recover in the second half of the year.

President of the Federal Statistical Office Roderich Egeler said that much of the growth in 2011 had been driven by domestic investment and private consumption, which rose by 1.5 percent, the highest jump in five years. Indeed, domestic consumption will continue to sustain the German economy for the rest of the year, Kai Carstensen of the Munich-based Ifo Institute told tabloid Bild on Thursday. "It will protect us from bigger problems," he said.

Despite the expected downturn, many experts still forecast positive growth for the coming year. The Cologne Institute for Economic Research (IW) forecast a GDP increase of 0.6 percent, while Allianz predicts it will rise by 1 percent.

The German Economy Ministry was also optimistic, saying on Wednesday that thanks to the thriving domestic economy, a "marked weak phase is currently not likely."