Top 5 Economic Institutions Forecast Zero Growth Rate In 2009 For Europe's Largest Economy

November 12, 2008 11:11 a.m. EST

Berlin, Germany (AHN) - Although there was a slight uptick of investor confidence in Europe's largest economy, the overall prognosis is still negative for Germany. Five leading economic institutions forecast a zero growth rate for Deutschland in 2009.

The five, collectively known as the German Council of Economic Experts, said at the report released Wednesday, "The shock waves emanating from the financial crisis have fully hit the German economy... After a surprising good start in the first quarter of 2008, the situation has become so gloomy that Germany is on the edge of recession."

With two negative growth rates for the first two quarters of 2008, the Thursday release of third quarter figure is expected to confirm Berlin's official entry into a recession phase. The council said even if gross domestic product will rise by 1.7 percent in 2008, a stagnation in economic output could not be avoided next year.

The council also cautioned Germany from extending across-the-board bailout packages for ailing industries. It said it would be wrong to keep the largest possible number of banks alive at any cost. The council pointed to the Swedish government's response to the Sweden banking crisis in the 1990s as a model for Germany to learn from.

The federal government's support for selected German banks was the reason behind the slight improvement in investor confidence which went up to negative 53.5 in November from minus 63 in October.