Merkel Urges German Industry to Share Burden as Crisis Deepens

Chancellor Angela Merkel called on German industry to help her government come up with ways of strengthening Europe’s biggest economy in preparation for a worsening of the economic outlook next year.

Merkel, who is hosting talks of her key ministers with industry leaders and economic experts at the chancellery in Berlin today, said the meeting is the first of a series of consultations aimed at assessing the impact on Germany of the global recession.

“We need to act together,” Merkel said going into the talks. “This is the common responsibility of politics, industry, unions and the banking sector.” The government “can’t support the economy on its own.”

Merkel faces persistent calls for more action to bolster Europe’s biggest economy going into 2009, an election year, as the global recession hurts demand for German exports. Paul Krugman, the Nobel Prize-winning economist, joined the critics, saying in an interview with Der Spiegel magazine that Merkel and Finance Minister Peer Steinbrueck are “misjudging the severity” of the crisis and “wasting precious time.”

Krugman’s warning follows economic data suggesting that the downturn may be accelerating in Germany, the world’s biggest exporter, where one in three jobs relies on foreign trade.

The Munich-based Ifo institute forecast on Dec. 11 that the economy will shrink 2.2 percent next year, the second assessment in as many days to predict the worst recession since World War II. The Essen-based RWI institute forecast a contraction of 2 percent on Dec. 10, forcing the government to reiterate its own outlook for next year of 0.2 percent growth.

‘Flashing Red’

“Signals for the German economy are flashing red for 2009,” Ifo said. The Ifo and RWI institutes are both members of a group that advise the government.

Economy Minister Michael Glos today denied as “pure speculation” a Spiegel report that the government already concedes that the economy will contract 2 percent next year as Germany enters a “deep recession.” Glos is scheduled to review the economic outlook on Jan. 15.

Merkel has scheduled a further meeting on Dec. 18 with representatives of Germany’s 16 states, she said. Those talks will focus on public infrastructure projects that are ready to roll out, as well as the coordination of action between the federal government and the states “in these extraordinary times,” she told the newspaper Bild and Sonntag today.

Schools Investment

Foreign Minister and Vice Chancellor Frank-Walter Steinmeier told Bild that renovating schools, better equipping kindergartens and modernizing sports grounds would all be means of securing jobs while “investing in the future.” Steinmeier will lead the Social Democratic Party, part of the governing grand coalition, against Merkel’s Christian Democratic Union at the national election in September 2009.

“Our aim is to preserve jobs,” Steinmeier told reporters outside the chancellery. “Yet every euro that we spend must be spent sensibly.”

Lawmakers passed the government’s 32 billion-euro ($43 billion) stimulus package on Dec. 5 in the face of opposition from Merkel’s Bavarian allies in the Christian Social Union, the sister party to Merkel’s CDU. The CSU demanded income-tax cuts on top of the measures on construction investment and tax relief included in the plan.

Forty-eight percent of respondents to a poll by FG Wahlen for ZDF television published Dec. 12 said that the stimulus package doesn’t go far enough. Twenty-six percent said it was sufficient, while 10 percent said it went too far, according to the poll of 1,286 voters conducted Dec. 9-11.

Merkel has set a deadline of a Jan. 5 coalition meeting before announcing any new measures.

“Germany is a strong country,” Merkel said. “I am deeply convinced that we Germans can overcome these challenges.”