Merkel steels Germans for 'more difficult' 2013

Govt in October slashed its forecast for economic output next year to 1.0%, central bank says it may flirt briefly with recession early next year

I / Berlin December 31, 2012, 9:02 IST

Chancellor Angela Merkel warned Germans that the economy, Europe's biggest, would experience a harder time next year than in 2012 and cautioned too that the eurozone debt crisis was far from over.

In her annual New Year address published today, Merkel said, "In fact, the economic environment next year will not be easier, but more difficult", adding, "The crisis is a long way from being beaten."

Although top exporter Germany has managed to hold up to the crisis fairly well, growth has slowed here as well since the beginning of the year.

After expanding by 0.5% in the first quarter of 2012, gross domestic product (GDP) grew by just 0.3% in the second quarter and a mere 0.2% in the third quarter.

And in October, the government slashed its forecast for economic output next year to 1.0%, compared to 1.6% previously anticipated.

The country's gloomy central bank has said Germany may even flirt briefly with recession early next year.

Nevertheless, "it has been possible this year to have the lowest unemployment and the highest level of employment since the reunification" in 1990, Merkel recalled.

And a slowdown next year "should not leave us discouraged but should spur us on", said the chancellor, according to the text of her speech released in advance by her office.

Turning to the eurozone's efforts to tackle its three-year debt crisis, she judged that "the reforms that we have decided are beginning to work".

"However, we still need more patience. The crisis is a long way from being overcome."

Merkel also called for better supervision of the financial markets, stressing, "The world has still not sufficiently learnt the lessons of the devastating financial crisis of 2008".