German Economy Shows Crisis Scars as Year Closes, Ministry Says

Germany’s economy is expanding “noticeably slower” in the final quarter as demand for exports, the mainspring for growth, tapers off in the euro region and globally, the Finance Ministry said.

After notching up growth of 0.5 percent in the third quarter, Europe’s biggest economy is straining to grow this fall as the debt crisis sweeps across its backyard, sapping demand for exports from cars to machines, the ministry’s latest monthly report shows. Domestic consumption was the sole source of economic growth in the third-quarter as imports and exports rose at the same pace, the Berlin-based ministry said.

Since September, demand for goods from Germany’s 16 euro- region partners -- the destination of 40 percent of its exports -- tailed off more dramatically than among the remaining 10 European Union states, the report stated. “To year’s end, the economy will probably move at a noticeably slower pace.”

While the economic outlook weakens, Germany remains the “stability anchor” of the euro region, pointing the way to its partners by championing policy that promotes growth and budget cuts, said Joerg Asmussen, the Deputy Finance Minister who authored the report and who will become the European Central Bank’s chief economist next year. Mastering the crisis “requires endurance,” he said.

Asmussen said the government is focusing on a five-pronged approach to tackling the crisis, comprising help for Greece, strengthening banks’ capital reserves, boosting the European bailout fund, creating a currency “stability union” and making a “clear and decisive commitment to budget discipline and to accelerate structural reforms.”

While economic growth is losing steam, and risks will prevail into 2012, tax-revenue growth, domestic demand and weaker inflation will help the economy next year, Asmussen said. Federal tax revenue grew 11.5 percent in October compared with the month a year earlier.

To contact the reporter on this story: Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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