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German Economy Best Placed to Benefit From Crisis, IfW Kiel Says

Germany is better placed than most of its euro-area partners to exploit the debt crisis to bolster its economy, the IfW-Kiel economic institute said in its latest outlook report.

Low interest rates and price pressures, the relative weakness of the euro and the country’s “safe haven” status for investors are helping it weather the crisis better than its European partners, the IfW said today in an e-mailed report. The institute raised the growth outlook for Europe’s biggest economy this year to 0.9 percent from 0.7 percent forecast in March.

By keeping its benchmark interest rate at 1 percent, the European Central Bank handed German banks and companies a crisis tool that is “extremely beneficial,” said the IfW. German government bonds are in demand and foreign investors are showing heightened interest in taking company stakes, it said.

At the same time, Germany can draw little succor from the crisis that is steadily eroding its economic outlook, said IfW. “The headwind from abroad is so strong at the moment that a major reversal or at least a significant setback for the German economy has become more probable,” said the IfW economists.

The IfW is a contributor to a group of institutes that Chancellor Angela Merkel consults for independent forecasts.

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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