Jeremy Rifkin, President of the Foundation on Economic Trends (left), and Professor Hans-Werner Sinn (centre), listen to German Chancellor Dr. Angela Merkel. The Chancellor hosted a debate in March 2006, between Rifkin and Sinn, Germany's leading neo-liberal economist, on "The Future of Work".

In its latest economic forecast, the Ifo Institute at the University of Munich forecasts a slowing of economic growth in the German economy.

“For 2008 we expect growth of 1.6 percent”, President Hans-Werner Sinn said at an event in Augsburg, revising downwards the Ifo December 2007 forecast, which looked to 1.8 percent growth for this year.

The labour market figures for 2008 will be somewhat more favourable than forecasted in December 2007: the unemployment figures for 2008 will be 3.3 million (in December 2007, 3.5 million was expected) and the rate of unemployment for the year will stand at 7.7 percent (December 2007 forecast: 8.0 percent). This does not contradict Ifo’s GDP forecast.

The present winter has been unusually mild, which has led to more jobs in construction, and GDP growth and employment changes have be strongly decoupled since the Agenda 2010 reforms. The high rate of inflation to the end of 2007 will not continue, since this was basically attributable to the VAT increase and was a one-off effect. Inflation will average 2.3 percent in 2008. With expanding real incomes, private consumption will increase by around 1.3 percent; in December the Ifo Institute expected a 1.5 percent rate. Also the export forecast has been revised due to the somewhat weaker growth expected in world trade: now an increase of 5.4 percent is foreseen (in contrast to + 5.6 percent in December).

As a reason for these slight corrections, Sinn mentioned the recent developments in the US economy, which is clearly weakening and having corresponding effects on the world economy. Whether the US is facing a recession is still unclear. Sinn expects that because of recent tax cuts the US will just barely avoid a recession. For this reason he also favours the US economic stimulus package.

The current economic situation in Germany, however, does not justify an economic stimulus programme. “This is not necessary at the moment and policy makers should not play this card yet.” But they should prepare themselves for such an event.