BERLIN, Feb 13 - German economists said on Friday that a recovery was under way in Europe's largest economy and only a significant rise in the euro's exchange rate against the dollar could put the upturn at risk. The head of the RWI economic research institute told that Germany was on the brink of a lasting economic upturn following three years of stagnation. "The nascent upswing already evident in the past few months has taken root, but without providing any reason for jubilation," RWI President Christoph Schmidt said in an interview conducted on Wednesday and embargoed for release on Friday. He said the institute was sticking to its growth forecast for this year of 1.8 percent. But if the euro strengthened towards $1.45 against the dollar, from about $1.28 now, it would shave half a percentage point from German growth this year, Schmidt said. The head of Germany's DIW economic institute, Klaus Zimmermann, told Handelsblatt newspaper there was no reason for now to change his think-tank's forecast of 1.4 percent growth for 2004. "Only when the euro exceeds $1.35 on a long-term basis would we have a problem," he said. The head of the government's panel of economic advisers Wolfgang Wiegard told Frankfurter Allgemeine Zeitung that the panel's growth forecast of 1.6 percent for 2004 would apply if the euro exchange remained at an annual average of $1.25.
"If the euro exchange rate stays at $1.25 as an average over the year then we won't have to retract our growth forecast," said the chairman of the so-called "Five Wise Men". "But world trade is developing very strongly. We expect the positive effects of that to be stronger than those of the euro's rate."
His comments came after data showed on Thursday that German economic growth was unexpectedly sluggish in the last quarter of 2003, hurt by a slowdown in exports and weak consumer spending. Data released by the Federal Statistics Office showed gross domestic product expanded by 0.2 percent quarter-on-quarter in the fourth quarter. A poll of 20 economists had forecast growth of 0.3 percent . The euro is hovering just below a life high of $1.29 hit in January. A strong euro makes goods from Germany's key export sector more expensive outside the euro zone. The German government's official forecast is for growth of between 1.5 and two percent in 2004.//