German Chancellor Gerhard Schroeder has unveiled a E15bn investment package to help Europe's largest economy pull itself out of a massive slump. He also announced a series of controversial reform measures for the labour market, including making it easier for companies to fire workers, shortening the period over which the unemployed are entitled to full jobless benefit and cutting welfare payments. "The government must act to restore confidence," Schroeder said in a speech to the Bundestag this morning.
Analysts said it was encouraging that Schroeder did not back down on labour market reforms, but added that even more needs to be done as the measures will merely repair the damage done in recent years. The German economy struggled to grow last year and stalled in the last three months of 2002, posting zero per cent growth. Yesterday, one of Germany's leading research institutes, the RWI, today warned of further stagnation and cut its forecast for GDP growth for 2003 from 1pc to just 0.6pc. Jim Power, chief economist at Friends First, said in his latest quarterly review that he is "desperately negative" on the outlook for German growth this year. //www.fxcentre.com