German Chancellor Gerhard Schroeder's economic plan should only be the first step in a major package of reforms for the economy, the country's six leading economic research institutes said today. The comments came as the institutes, which include the influential IFO, published their spring report, in which they slashed German GDP growth this year to only 0.5pc from 1.4pc forecast last October. The report also said the economy will only expand by 1.25pc next year. The institutes said the recently proposed government reforms should only be a starting point to more concrete changes. "The measures announced in the Agenda 2010 point in the right direction. But they can only be a beginning," they said.
"In the coming year, the recovery will strengthen. but overall, Germany's economic recovery in 2004 will continue to lack a major dynamic force," the report added. The report also said the unemployment rate is expected to be 10.5pc next year, up from 10.4pc this year, and it warned that the budget deficit will remain above the 3pc of GDP limit set out in the EU Growth and Stability Pact. The institutes forecast a deficit of 3.4pc this year, easing to 2.9pc in 2004. ///www.fxcentre.com