GERMANY CASE

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Introduction

The German economy isthe worlds third largest, and IT alone accounts formore or less one-fourth of the EuropeanUnions GDP. With regard to world trade it is second in the world4 . It is the biggest trading partner of U.K., France andItaly, Europes second-, third- and fourth-largest economies, respectively5 . From the 1948 currency reform until theearly 1970s, West Germany experienced almost continuous economic expansion, but real GDP growth slowed downand even declined from the mid-1970s through the recession of the early 1980s. The economy then experienced eightconsecutive years of growth that ended with a downturn beginning in the late 1992 (Annexure 1). Since reunificationin 1991, Germany has seen annual average real growth of only about 1.4% and stubbornly high unemployment6 . Thebest performance since reunification was registered in 2000, when real growth reached 3.0% on account of globaleconomic recovery and domestic private consumption (Annexure 2)7 .

German unification has not been a qualified success in terms of economic integration and GDP growth 8 . Private

consumption, which accounts formore than 60%of the GDP, rose by 46%for the period 1991-2003. This wasinsufficientto offset the decline in government consumption and the volatility of exports. Since 2000, even private consumptionhasbeen declining dueto consumers not so optimistic expectation of theeconomy9 and their increasing propensity tosave. This was partly due to the rise in unemployment and uncertainty of the sustainability of socio-welfare schemes.

Helmet Kohl, who was preoccupied with the unification to the detriment of economic growth, was given marchingordersand was replaced with Gerhard Schrder (Schrder) on October 27th 1998. As promised in the election campaign,Schrder tried to kick-start the economy with the tax reforms, an exercise with a little success. Subsequently in hissecond term, he sought to revive the economy by implementing comprehensive economic reforms, titled Agenda2010.

Germanys Economic Dilemma

To Save or To Spend1?

Keynes always maintained that a big part of economics was psychology (animal spirits and all that) so the stake

of psychological play in Germany is of no little importance at the moment2.

Psychology can be a brake on growth, or it can be a spur to growth. There is a big risk that in Germany, it will

remain a significant brake. We must all work together.

Hans Eichel, German Finance Minister3

1 Spend refers to consumer spending and investment by companies.2 http://www.livingontheplanet.com/bl/archives/000352.html3 ibid4 Between 1991 and 2002, the German trade surplus soared. From 11 billion in 1991 it increased to around 84 billion in 2002. Imports totaling 665 billion were offsetby the export of goods

and services totaling 749 billion. The year before, the trade surplus had reached a record 87 billion. http://www.tatsachen-ueber-deutschland.de/644.0.html5 http://quote.bloomberg.com6 Since 2001, unemployment has been consistently above 4 million mark.7 http://www.worldbank.org/cgi-bin/sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Fdeu_aag.pdf8 Reunification with East Germany has been colossally expensive, costing 1.25 trillion since 1990, and still consuming 4% of GDP in transfers ( as of 2004), with the added burden of 20%

unemployment in the region. The Economist9 As measured by the Munich based IFOs business confidence index.

This case studywas written byC Ananda Prasad under the guidanceof G Srikanth, IBSCDC.It is intended tobe usedas the basisforclass

discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from

published sources.

2004, IBSCDC.

No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without

the permission of the copyright owner.

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Germanys Economic Dilemma To Save or To Spend?

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Policy experts believed that Agenda 2010 could be a success only if consumers dilemma to save or to spend,was settled boosting consumer spending10 . Schrder had to achieve this without resorting to too much of Keynesianeconomics as his fiscal and monetary policy maneuverability was constrained by the euro areas stability and growthpact(SGP) and European Central Banks monetary policy decisions.

Germanys Economy Under Gerhard Schrder

Germanys economic system could be described as a social market economy11 . The Government had beenproviding an extensive range of socialservices. Although it intervenesin the economy through the provision of subsidiesto selected sectors and the ownership of some segments of the economy, competition and free enterprise have beenpromoted as a matter of policy. The economy is heavily export-oriented, with exports accounting for more than one-third of national output. As a result, exports traditionally have been a key element in the macroeconomic expansion.Germany has been a strong advocate of closer European economic integration, and its economic and commercialpolicies have increasingly been determined by agreements among the European Union (EU) members. Like other EUmembers, Germany uses the common European currency, the Euro, and the European CentralBank sets its monetary

policy.More than a decade after the unification of the two German states, great progress has been made in raising the

standard of living in eastern Germany, by the introduction of a market economy and improvement of infrastructure. Atthe same time, the process of convergence between East and West has been taking longer than originally expectedand, on some measures, has stagnated since the mid-1990s. Since 2001, Eastern economic growth rates have beenslower than in the West, unemployment twice as high, prompting many skilled easterners to seek work in the West,and productivity continues to lag. Eastern consumption levels are dependent on public net financial transfers fromWest to East totaling about $65 billion per year, or over 4% of the GDP of western Germany. In addition to socialassistance payments, the government plans to extend funds to promote eastern economic development until about2010. However, there is discontent in the more populous West Germany that East Germany has been a drag on theGerman economy.

Germans are regularly asked in surveys about how they assess the economic situation. In September 1998, only

35% of the respondents considered the economic situation to be good or very good 12 . The popular discontent wasexpressed at the September 1998 polls, ousting Helmut Kohl and handing a strong mandate to the new ChancellorSchrder. His main task was to lift the moribund economy to a healthy level and thus reduce unemployment from10.6% (4.1m people)13 to acceptable levels. The roots of the economic troubles were very clear: wages, taxes, social-security deductions and state subsidies were all too high, the labor market too inflexible. Lafontaine14 , the financeminister argued that higher public investment was necessary to stimulate consumer demand and thus economicgrowth. However, the leading employersfederationscriticized the governments economic course15 and finally Lafontaineresigned in March 1999. Sensing the peoples psychology16 Schrder replaced Lafontaine with Hans Eichel, whofocused on a gradual reduction of the budget deficit through cuts in public expenditure. In early July 1999, two SPDminister-presidents Kurt Beck and Wolfgang Clement demanded real wage freezes, i.e., linking nominal wage increasesto inflation, for the next two years in order to reduce unemployment. Apart from budget cuts, Schrder introduced taxreforms17 (Annexure 3) to revive the economy and reduce unemployment. He believed that a 10% tax cut would

produce a stimulus to consumer spending of a similar scale. However, according to economic commentators, thefigure could be just 1.7%18 .10 Consumer spending accounts for more than half of GDP.11 The Social Market Economy concept had two central aspects: 1) Decontrol to a certain degree of market processes, and 2) an institutional framework of government Ordnungspolitik, an

orderly structure of rules for the economy, designed to steer market powers and compensate for undesirable effects of liberalization. Although the original concept of Social Market Economyspeaks of allsocial forces as order-giving potentials, the governmenthas, over the course of time, turned into a monopoly ofOrdnungspolitik. The overall aim of German economic policy is tosecure stable prices, a high rate of employment and a balanced foreign trade along with steady economic growth. The central task of economic policy is to limit unemployment. http://www.techcentralstation.com/031704B.html

12 http://www.bundesregierung.de/en/Latest-News/Speeches-,10155.23403/rede/Address-given-by-Chancellor-Ge.htm13 Gerhard Schrders task October 1st 1998, The Economist, http://www.economist.com/research/articlesBySubject/displayStory.cfm?subjectid=348939&story_id=16697014 He is an enthusiastic supporter of Keynesian demand management and expansive fiscal policy and a favorite of the left wing of the SPD as well as of the trade unions.

http://www.eiro.eurofound.eu.int/1999/08/feature/de9908116f.html15 The German weekly Der Spiegelasked for the whereabouts of Schrder and called for the chancellor to put Lafontaine in his place. http://www.psa.ac.uk/cps/2004/Schweiger.pdf16 Nearly 70% of Germans believed the country needs far-reaching reform to cope with globalization, according to a poll by Berlins Forsa Institute. Labor unions agreed to wages of 3% or less,

in line with productivity and inflation,and signed longer,two-year contracts thatmade iteasi er for companies to plan and to holddown costs. -Gerhard Schrder:The Accidental Reformer May1st 2000, BusinessWeek,http://www.businessweek.com/2000/00_18/b3679011.htm

17 (Read tax cuts)18 Chancellors cash crisis, July 14th 2003 - http://www.guardian.co.uk/economicdispatch/story/0,12498,997949,00.html


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The tax cuts cheered companies and consumers alike19 . Germanys business leaders hailed the governmentsdeficit reduction package as a breakthrough for economic reform. The government reformed corporate tax law with aview to creating an internationally competitive tax system Corporate tax was cut from 40% to 25% effective from2001. Moreover, the government spending cuts amounted to DM30bn ($15.9bn). Most of these cuts came from thelabor and social security budget. The rest was spread evenly throughout other government departments. A big chunkof savings came from linking the annual rise in pension payments to the rate of inflation, as opposed to averageearnings20 . These measures were supposed to strengthen private consumption and facilitate the financing ofinvestments, both of which are prerequisites for more growth and employment. In the wake of the world economicrecovery in 1999 and 2000, German economy also seemed to recover. In September 2000, 60%of the respondentsofthe economy survey said that economic situation looked good or very good21 . However, Germanys economy, whichwas dependent on exports, remained vulnerable to external shocks22 . The September 11th 2001 terrorist attack onWorld Trade Center shook investor confidence not only in United States but also in Germany along with that in manyindustrialized nations. In thiscontext, German employers who needed flexible hire and fire policy failed to get adequatesupport from the government authorities, to keep theirgoing concernsgoing. Budget cuts and tax reforms neither didaddress the concerns of international investors nor that of German companies for that matter. As a result corporatesconsistently criticized the structural rigidities in the economy, the high and rising cost of labor and the poor mix of fiscaland monetary policy since German unification.

Corporate taxreform has beena stop-start process, leaving companies uncertain about future tax bills and benefits.The level of basic corporate tax is still the highest in Western Europe, at 38.7%, compared with 35.4% in France, 34%in Austria (falling to 25% next year) and 12.5% in Ireland. Though there are ways for companies to reduce this burden,they tend to favor the larger firms. According to Lorenz Jarass, an economics professor at Wiesbaden University, thetop 30 listed companies tend to get more credits back from the government than they payin tax. For example, in 2002,DaimlerChrysler reclaimed a net 1.2 billion ($1.5 billion), while the tax payments of Thyssen Krupp and Lufthansanetted out at zero23 . That sort of favoritism nags the smaller, Mittelstandcompanies, which insist they are the backboneof the German economy, employing 70% of the workforce, accounting for 46% of investment and creating 70% of allnew jobs. There are fewer ways open for them to reduce their tax bills24 .

Apart from employers, employees have also been unhappy about the way the tax cuts were structured. Between

1991 and 1997, the cost of employing German workers went up by 11%. And, since 1999, tax cuts put more money inthe hands of consumers. Consequently consumer demand was supposed to pick up and lift the economic growth rate.Despite the rise in wage costs, net incomes remained virtually flat because of increases in tax and social securitycontributions. Income taxes were reduced only marginally and the social security contributions, which amounted to40% of wage costs, only came down by a fraction. Since Germany had been a country with high income tax rates, butrelatively generous tax write-offs the combined result was an effective tax increase for many middle - and high-income earners, who drive the consumer demand up (Annexure 4). Moreover, unemployment continued to increasesince 2001, making people pessimistic in their outlook. In May 2002, IFOs 25 report mentioned that its businessconfidence index fell to 96 from 96.3 in April 2002, according to the median of 38 forecasts in a Bloomberg Newssurvey26 . A separate survey of economists showed that household spending failed to increase. GDP rose 0.25%in themonths of April, May and June, barely above the 0.2% rise in the first three months of 2002. Unemployment inGermany rose to a three-year high; business confidence among top companies faded and the countrys leading stocksmarkets index, the Xetra Dax, fell by almost 30% further hampering consumer and business confidence 27 .

In thebackdrop of rising unemployment and poor economic growth, Schrder wasexpected to lose in theSeptember2002 elections. However, he was reelected28 . He understood that tax reforms and budget cuts would fail to take theeconomy much further and that his country needed the long delayed structural reforms to revive the economy. So, onMarch 14th 2003, he announced comprehensive structural reforms labeled Agenda 2010 (Annexure 5). He indicated19 Tax cuts put extra money in the hands of employers and consumers.20 http://www.international.se/wolfgang.htm21 German Business Climate darkens July 25th 2002, http://www.cnn.com/2002/BUSINESS/07/25/german.ifo/index.html22 Companies generate almost a third of their profits through exports, and almost one in four jobs are dependent on foreign trade., http://www.tatsachen-ueber-deutschland.de/641.0.html23 How to pep up Germanys Economy May 6th 2004, The Economist24 ibid25 IFO Institute is one of the largest economic research institutes in Germany. It is a service-based research organisation with a three-fold orientation: conducts economic research, offers advice

to economic policy-makers and provides services for the research and business communities.26 opcit - German Business Climate darkens27 German economy barely grew August 19th 2002, http://edition.cnn.com/2002/BUSINESS/08/19/german.gdp/28 His re-election in September 2002 was by a tiny margin, based in large part on his opposition to American foreign policy and his response to the preceding summers floods, not on a mandate

for economic change. - http://www.iie.com/publications/papers/posen0903-3.htm


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that the objective of the program was to make structural improvements that would save 45 billion euros in federalbudgetexpenditure29 . The program was aimed at cutting spending on health, pensions and social welfare, streamliningthe job market, relaxing employment legislation, encouraging people back to work and lowering taxes to boost consumerspending. The chancellors most controversial reform was aimed at the long-term unemployed, who comprised two-thirds of the jobless. Under his proposals, those who remained out of work for six months or more receive lowerbenefits, paid out over a shorter period 12 months, rather than 32. Furthermore, if they are offered a job and refuseto take it, they may lose their benefits altogether. The labor market reforms, part of Agenda 2010, made it easier forfirms to hire and fire employees. Moreover, Schrder and Wolfgang Clement, the Economics & Labor Minister, broughtchanges in working hours30 , pushed back retirement age and reduced holidays31 . This was supposed to absorb theshocks in both the demand and supply side of labor and in turn boost consumer spending. However, the Germanconsumers seemed to remain in a state of suspended animation unable to decide to save or spend.

To Save or To Spend?

Germany is willing to undergo change. Germany is moving forward. Schrder used these words in a policystatement delivered on July 3rd 2003, to describe a new mode of thinking brought about by the Agenda 2010 reformprogram32 . However, his decision in mid-December 2003, to bring forward the tax reform evidently failed to have thedesired effect on consumers of removing their dilemma to save or to spend. The uncertainty resulting from the continuedcontroversy regarding tax, social security and pension reforms impacted on the mood and consequently, all consumerclimate indicators were down in January 2004.

The surveycarried out byGfK33 in January 2004, showed that the bad mood among German consumers deterioratedfurther. It was in direct opposition to the optimism felt by companies (IFO) and the financial analysts (Zentrum frEuropische Wirtschaftsforschung). According to the IFO business climate index and ZEW, companies and financialexperts continue to be positive about the future. The recent consumer low is attributable to the unresolved politicaldebate surrounding the tax, pensions and healthcare reforms. The consumer climate indicator, which had been risingslowly but surely since May 2003, is slightly down for the first time in the recent months.

At the end of 2003/beginning of 2004, German consumers were once again pessimistic about an economic upturn,

following several months of optimism in 2003. With a value of -1.6 points in December 2003, the economic outlookindicator decreased by a further 4.2 points in January 2004 to stand at -5.8. Consumers did not share the positiveexpectations of companies, financial and economic experts with regard to the economy 34 . Income expectations weredown again. The indicator lost 2 points in December 2003 and a further 6 points in January 2004. The soberingdevelopment was the manifestation of consumer irritation as to their future financial situation. In the consumersminds, the fear of potential financial burdens outweighed any possible benefits resulting from the healthcare reform.Pensioners, in particular, were worried about having to get by on less money at the beginning of 2004. From January2004 onwards, pensioners had to pay the full healthcare contribution on company pensions. Even the IFO BusinessClimate index of manufacturing, construction, retailing and wholesaling in Germany continued its downward slideduring the monthsof January, February andMarch 2004. It slightly rose inApril only to fall again in May35 (Annexure 5).

In manufacturing, both the appraisals of the business situation as well as the expectations improved slightly. Inretailing the business climate index remained largely unchanged; whereas the assessments of the current businesssituation worsened, the business expectations for the coming six months improved. In construction and wholesaling,

however, both components of the business climate index weakened.

The slight decline in the business climate was a result of a worsening in East Germany, but in West Germany theclimate indicator rose a fraction. The latest survey results, especially the nearly unchanged business expectations,speak for an ongoing, moderate economic recovery in Germany in the later part of 2004. May be Germany was willingto undergo change. And Germany was moving forward.29 Schrder: Germany Open To Reducing Subsidies 11th July 2003, http://www.scoop.co.nz/mason/archive/scoop/stories/e9/bd/200307111040.a005cdf3.html30 Analysts say justan hour more work per week would cutproduction costs by three percent,and have noted that0.6 percentage points ofthe 1.7 percent economic growth forecastfor Germany

in 2004 would come alone from the fact that five national holi days fall on weekends. http://quickstart.clari.net/qs_se/webnews/wed/ac/Qgermany-jobs-economy.RbUL_DOU.html31 Germanys comparatively short work week, as well as the numerous holidays and vacation days that drive up labor costs compared to the i nternational market, contribute considerably to the

desperate economic situation.32 http://www.scoop.co.nz/mason/stories/WO0307/S00066.htm33 The GfK Group, the No. 5 market research organization worldwide, is active in five business divisions, Consumer Tracking, HealthCare, Non-Food Tracking, Media and Ad Hoc Research. In

addition to 15 German subsidiaries, the company has over 120 subsidiaries and affiliates located in 50 countries.34 http://www.naeurope.co.uk/en/print.htx?nr=30000199635 Ifo business climate in industry and trade - http://www.ifo.de/pls/portal30/ifo_apps.gsk_public_englisch.show


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Annexure 1

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Annexure 2a

Economic Growth(% GDP in 1995 prices) in Germany 1992-2003

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Compiled from: http://www.psa.ac.uk/cps/2004/Schweiger.pdf

Annexure 2b: Growth, Inflation and Unemployment

http://www.tradewatch.dfat.gov.au/TradeWatch/TradeWatch.nsf/vEconomicWeb/Germany

4

3

2

1

0

%

12

11

10

9

8

%

Unemployment rate (RHS)

Growth (LHS)

Inflation (LHS)

1998 1999 2000 2001 2002 2003 2004 2005


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Annexure 3

Highlights of Tax ReformsA) Highlights of the Tax Reform 2000

The rate of corporate income tax was reduced from 30 percent 40 percent down to 25 percent.

The tax imputation system was abolished. Inter-company dividends between German corporations areexempt from tax. Individual shareholders are only taxed on 50 percent of the dividends received fromcorporations.

A national participation exemption wasintroduced. Allcapital gains realized directly or indirectly by a Germancorporation from the sale of shares in a German subsidiary are exempt from tax. (Previously, such exemptionwas available only in a sale of shares in a non-German subsidiary).

German thin-capitalization rules for foreign investors were tightened.

The depreciation of assets was restricted.

The conversion model, which enabled a step up in basis upon a conversion of a corporation into apartnership, was abolished.

The quota for a material holding in a corporation was reduced from 10 percent to one percent. Consequently,the gain resulting from the sale of shares in corporations is tax exempt if the seller owns less than onepercent of the corporation (previously less than 10 percent).

B) Highlights of the Tax Reform 2001

The requirements for a fiscal unity for trade tax purposes have been adapted to the requirements for afiscal unity for corporate tax purposes.

The transfer of assets between partnerships and partners and vice versa is tax neutral under certainconditions.

Partnerships and sole proprietorships are entitled to a tax free rollover of capital gains up to 500,000 from

the disposal of corporations if such capital gains are utilized for the investment in another corporation. No tax relief is available for the disposal of only a part of a partnership interest by individuals.

Portfolio dividends (participation of less than 10 percent) are subject to trade tax. Expenses connected tosuch dividends are deductible for trade tax purposes.

Capital gains by corporations from the disposal of partnership interests are subject to trade tax.

Dividends and capital gains are defined as active income in the context of CFC-regulations.

Dividends and capital gains are tax exempt if the income of a CFC was subject to tax.

Annexure 3b: Agenda 2010 Overview

Healthcare Reform

On September 26, 2003 Germanys parliament, the Bundestag, passed a law that would reduce monthly premiumpayments for the national healthcare system from 14.3% of an employees income to 13.6% next yearand 12.15%by2006. As health insurance payments are split by employers and employees, the reduced premium is aimed atlowering Germanys staggering non-wage labor costs. To finance the cuts, the public health fund will no longerfinance dentures or replacement teeth and will require patient co-pay for doctor visits and prescriptions. The reformsare expected to save insurance companies up to 20 billion.

Labor Market Reform

A second reform bill passed on September 26, 2003 seeks to make Germanys heavily regulated labor market moreflexible. It reduces to 12 months the maximum duration a person can receive unemployment benefits after losing a

job and also makes it easier for companies to hire and fire employees. Older employees, however, could receiveunemployment benefits for up to 18 months. Contd...


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Labor Office Reorganization

A crucial component in the governments reform package, passed in an effort to reduce unemployment, is a massivereorganization of the Federal Labor Office. The office will be modelled after a private placement agency andrechristened as the Federal Job Agency, with responsibility for managing unemployment benefits and findingplacements for jobless. The law also requires companies to immediately inform the office if an employee has beengiven notice and to free up employees for job hunting so they can find other work before they become unemployed.The office would also have the ability to dock benefits for people who refuse to take employment.

Merging Unemployment and Welfare

The Hartz IV Law calls for unemployment and welfare benefits to be merged and spurthose without a job into action.Under the plan, unemployed persons capable of working would be given what the government is describing asUnemployment Benefit II after their eligibility for unemployment runs out. Unlike the current benefit for the long-termunemployed, which pays outas much as 57% of a persons last regular netincome, the new benefit would be cappedat345 in western Germany and331 in the East. A person may notbe eligible to receive this second unemployment

benefit if they have a working spouse or has assets exceeding 13,000.Tax Cut

The third phase of a previously approved German tax reform would be bumped up to 2004 from its originally plannedimplementation in 2005. The reform will change the countrys progressive tax rate from 19.9% to 15% at the lowestlevel and from 48.5 to 42% at the highest level. The cut is expected to save taxpayers a total of 21.8 billion.Chancellor Gerhard Schrder is hoping the cut will spur consumer spending and provide a needed boost to thecountrys ailing retailsector. The government plans to finance the tax cutby slashing federal subsidiesand privatizinggovernment-held properties.

Communal Financing

German cities are running at a record deficit this year, with a 10 billion shortfall in funding. The governments planseeks to increase the percentage received by communities of the local business tax from 2.2 to 3.6%. The tax wouldalso be extended to previously excluded freelancers, doctors and lawyers as well as to any interest a company earns

or any rent or licensing fees it pays. The government says that the plan would put 4.5 billion in additional funds intocity coffers by 2004 and5 billion the year after. The merger of unemployment and welfare benefits is also supposedto save the cities several billion euros.

Reform of Master Craftsmen Law

Under a controversial plan approved by the government earlier this year, mandatory apprenticeships and mastercraftsmans diplomas would be eliminated in 65 skilled trades, allowing ambitious journeymen to set up shop withoutthe prestigious qualification. The changes would only apply to less dangerous work like tile-laying, tailors orgoldsmiths. More high-risk jobs, like electricians and opticians, would still be required to go through the lengthy andexpensive certification apprenticeships.

Social Insurance Reforms

Earlier this year, the government commissioned a panel led by Bert Rrup to issue an advisory plan for saving asocial system threatened with collapse by a fast-growing German population. The key provision of the Rrup

Commission plan, released in August, is to increase the age of pension eligibility from the current 65 to 67. It wouldalso reduce pension levels from 48 to 40.1% of a recipients former income. Workers would not be eligible for earlyretirement before the age of 64, and the annual cost-of-living increase would be reduced by 0.5%. The governmentis considering the commissions work as it drafts its own bill for reforming the pension system. The first reading isexpected in November or December.

Meanwhile, a commission appointed by the conservative opposition Christian Democrats and led by former GermanPresident Roman Herzog has also called for the retirement age to be increased to 67, a proposal that has split theChristian Democratic Union internally and led to a rift with its Bavarian sister party, the Christian Social Union. TheHerzog Commission has also called for a flat monthly health insurance premium of264 for all Germans, a move itsays would save the public health fund 27 billion.

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Source: www.dw-world.de/english/0,3367,1432_A_988374,00.html


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Annexure 4

http://www.international.se/wolfgang.htm

http://www.economist.com/agenda/PrinterFriendly.cfm?Story_ID=1619628

Annexure 5 a

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Germany (Index, 2000=100, seasonally adjusted)

5/03 6/03 7/03 8/03 9/03 10/03 11/03 12/03 1/04 2/04 3/04 4/04 5/04

Climate 89.4 90.6 91.7 92.8 93.0 95.3 96.2 97.0 97.5 96.4 95.4 96.3 96.1

Situation 87.1 88.1 88.2 89.5 88.3 91.0 91.8 91.9 92.5 92.6 92.2 94.9 94.4

Expectations 91.8 93.2 95.2 96.3 97.9 99.7 100.9 102.4 102.8 100.3 98.8 97.7 97.8

Source: Ifo Business Survey

Annexure 5b

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Germany (Index, 2000=100, seasonally adjusted)

5/03 6/03 7/03 8/03 9/03 10/03 11/03 12/03 1/04 2/04 3/04 4/04 5/04

Trade and Industry -21.9 -19.6 -17.5 -15.2 -14.8 -10.3 -8.4 -6.9 -5.8 -8.1 -10.0 -8.2 -8.7

-Manufacturing -14.6 -12.9 -9.7 -5.9 -5.4 0.5 4.5 6.2 8.3 5.7 3.2 3.9 4.4

-Construction -44.0 -40.6 -43.5 -42.0 -45.4 -45.2 -41.8 -39.8 -39.2 -39.8 -37.8 -39.5 -41.4

-Wholesaling -30.9 -29.0 -25.5 -17.9 -20.3 -15.1 -14.6 -12.9 -12.7 -18.0 -15.6 -14.3 -18.1

-Retailing -22.2 -18.0 -17.1 -25.0 -19.0 -17.6 -23.6 -23.1 -25.1 -24.3 -31.7 -21.7 -21.9

Source: Ifo Business Survey

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GERMANY CASE