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Germany Won’t Change Policy

June 21, 2001

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BERLIN (AP) _ Germany’s ruling coalition came under fire Thursday for its response to the economic slowdown but said its policy of budget austerity and tax cuts wouldn’t change.

In a parliamentary debate on the economy, conservatives blamed Chancellor Gerhard Schroeder’s coalition of Social Democrats and Greens for sharply slowing growth, rising inflation, a stagnant labor market and the euro’s weakness against the dollar.

``The fatal downward spiral of the German economy can be slowed only if the red-green coalition finally, finally takes countermeasures,″ said Rainer Bruederle of the small, pro-business Free Democratic Party.

Two leading German research organizations lowered their 2001 growth forecasts to as little as 1.3 percent, well below the 2.0 percent rate predicted by the government.

Economics Minister Werner Mueller recently said Germany might post no growth in the second quarter, making it ``very difficult″ to achieve a full-year growth rate of 2.0 percent. Last year, the German economy grew by 3 percent.

Karl Diller, a senior Finance Ministry official, told parliament that many experts expect German growth to rebound in the second half of the year, not least because of anticipated lower inflation as the effects of recent high energy and food prices ease.

``Most economic experts expect a continuation of the upward trend during the remainder of the year,″ he said.

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