GERMANY HITS BACK AT FRENCH AND U.S. CRITICISM / THE FINANCIAL TIMES ( RECOMMENDED READING )

Germany hits back at French and US criticism


By Gerrit Wiesmann in Berlin and Stanley Pignal in Brussels

Published: October 21 2010 13:07
Last updated: October 21 2010 22:20

Germany sternly rebuffed foreign critics of its economic policies, lauding the strength of its recovery while criticising its trade partners for lax finances and currency manipulation.


Washington and Paris have urged Germany to boost internal demand instead of relying on exports to fuel its recovery.

But Rainer Brüderle, Germany’s economics minister, delivered a robust defence of the country’s economic course on Thursday before taking a swipe at the US, France and, implicitly, China.


“Growing domestic demand shows our recovery is standing on two feet,” said Mr Brüderle, calling on Christine Lagarde, the French finance minister, to take note of Germany’s “self-sustaining upturn”.


Mr Brüderle cited higher-than-expected government growth forecasts for Germany. Gross domestic product is expected to rise by 3.4 per cent this year, up from a spring forecast of 1.4 per cent, and 1.8 per cent in 2011, up from 1.6 per cent.


Ms Lagarde and others have criticised Germany, claiming its reliance on exports as opposed to domestic consumption was damaging to the European and global economies.


Speaking ahead of a trip to South Korea for a G20 finance ministers’ meeting, Mr Brüderle deprecated US calls for more government spending, saying Germany’s recovery was “a non-Keynesian growth programme” in which fiscal discipline spurred private investment.


He implicitly criticised China, saying Germany “did not manipulate its currency” to gain economic advantage, and warned of the dangers for the growth of “currency war ... or ... trade war”.


Germany’s economic standing was bolstered on Thursday by a closely watched survey of industrial activity in the eurozone, which showed that Europe’s largest economy continues to underpin growth across the euro bloc.


Interactive: Economic disjunction within the eurozone

Click on : http://www.ft.com/cms/s/0/4220f626-d54c-11df-8e86-00144feabdc0.html

The Markit purchasing managers’ index showed the growth rate of economic output across the eurozone falling to a 12-month low in October. The 53.4 reading, down from 54.1 in September, remains above the 50 points which separate economic growth from recession.


Outside Germany and France, another strong performer, eurozone output fell for the first time since November 2009, weighed down by “peripheral” countries such as Ireland, Portugal and Greece.


“It’s a textbook recovery,” Mr Brüderle said in Berlin, describing how an uptick in foreign demand earlier this year had spurred exports, then investment and finally job creation in Germany itself.


Mr Brüderle won backing from the German industry association, BDI, which said: “It is pleasing that the recovery has now established itself on a broad foundation”.


With unemployment expected to fall below 3m this autumn and remain “clearly below” that mark next year, the minister voiced optimism that German demand would continue to spur other economies.


At the start of the year, economists had worried about whether the German upturn would be “V-, W-, L- or U- shaped”, he said. “Now we know that was irrelevant. This has become an XL [extra-large]-recovery.”


By contrast, the eurozone as a whole will grow by a below-trend 1.7 per cent in 2010, according to the European Commission in Brussels.


“The further loss of overall growth momentum [in the eurozone] in October confirms that the slowdown in global trade and fiscal tightening in the region has started to bite,” said Martin van Vliet, economist at ING. “However, it is probably too early start fretting about a double-dip recession.”


Copyright The Financial Times Limited 2010.