I would like to thank the staff for a well written and balanced report and to express my authorities’ appreciation for focused and open discussions during the consultation.
My authorities broadly share the staff’s assessment of the current economic situation and the prospects of the German economy. Because of the strong links to the world economy, Germany was hit particularly hard by the global financial and economic crises. Germany’s gross domestic product fell by five percent in real terms in 2009, the sharpest drop since the founding of the Federal Republic. Both strong domestic policy support and recovering global demand have positively affected the German economy; a moderate recovery is underway. In January, the federal government revised its projection of real gross domestic product growth from 1.2 percent to 1.4 percent in 2010, slightly higher than the staff’s projection.
With the changing economic situation, policy demands are changing, too. To ensure that crisis-related state interventions and support measures do not throttle individual initiative and forces for innovation, the German authorities will focus on a consistent exit strategy. The right timing and design of exit strategies in fiscal policy, monetary policy and the financial sector is important for the sustainability of the recovery and will help build positive expectations in the markets. Most government measures to stabilize the financial system and to support companies and consumers will expire at the end of 2010. My authorities are also well aware of the importance of international cooperation and advocate an internationally coordinated strategy for an orderly exiting.