We would like to thank the staff for a concise and focused report which offers a balanced reflection of what my authorities considered to be a very constructive and candid dialogue during the consultations.
We broadly share staff's assessment that the environment for conducting economic and fiscal policy has become extremely challenging given the worsening of economic indicators as the financial crisis spills over to the real ecnomy. However, employment and real disposable income have expanded in Germany almost up to the end of 2008 as some key elements which have triggered and reinforced the crisis of the global economy have not featured highly in the past course of the German economy: housing prices remained stable in recent years, predominantly deposit-based financing of lending, low exposure of pension system to capital market developments, low debt ratios of corporates and households. To be clear, however, my authorities have and will act forcefully to the abrupt change in economic conditions. Essentially, this crisis will be temporary and the crisis response of the German government is being carefully framed in order to protect the economy from harm, yet not foregoing the commitment to credible economic and fiscal policies based on sound principles which my authorities deem crucial to master the long-term budgetary challenges and to maintain confidence in a sustainable fiscal policy.