German Growth Rate to Remain Stagnant as Euro Sours

The German Institute for Economic Research (DIW) released its latest report on Tuesday, predicting the future direction of the German economy. The institute said that despite a recent cyclical rebound, the German economy will only grow by 1,4 percent in 2004 and 2005, a downward revision of the institute’s 1.7 percent figure released in the Fall of last year. The lacklustre growth puts Germany behind its European neighbors and its transatlantic competitor, the United States. Next year’s European average is expected to be 1.7 percent, while the U.S. could climb as high as 4.2 percent. “We continue to see the phenomenon that Germany lags behind Europe and the United States,” explained DIW president Klaus Zimmermann. Among the culprits: the strong Euro, which reached an all-time high on Tuesday at €1,27. Should the Euro continue to climb, Gustav Horn, a economic expert at the institute, said the European Central Bank will have to cut interest rates.