The German economy will post zero growth this year, according to the country's six leading economic institutes. The institutes have have cut their GDP growth forecast for 2003 to zero from 0.5pc previously, and also shaved their 2004 forecast to 1.7pc from 1.8pc. They said the economy will remain burdened by the strong euro and said a further cut in European interest rates would be appropriate if the dollar were to fall dramatically. The German government, which is due to review its growth forecasts this week, is currently forecasting GDP growth of 0.75pc this year and 2.0pc in 2004.
In their autumn report, the institutes also predicted that Germany's public deficit will be 4pc of GDP this year and 3.5pc of GDP in 2004, thus breaching the EU Stability and Growth Pact's 3pc limit for a third year in succession. The institutes said the European Central Bank's (ECB) monetary policy is expansive and conducive to growth in the eurozone, and they called on the bank to leave its key interest rate unchanged at 2pc for some time to come "as no inflation impulses are expected". //www.fxcentre.com