West German economy is in ‘robust stagnation’

Press, 5 June 1982, Page 14

West German economy is in ‘robust stagnation’

From the “Economist,” London

The gloom at the annual meeting of the Federation of West German Industry (8.D.1.) in Bonn last month was' so pervasive that Count Otto Lambsdorff, the Federal Economics Minister, attacked bosses for their excessive pessimism.

His audience was unmoved. Official figures show West Ger-: man manufacturing output fell by; 1 per cent in March. For the whole first quarter of 1982, production was 2 per cent lower than in the same period last year. The Government has been forecasting G.N.P. growth of 1-I‘/z per cent in 1982; thecountry's five main research institutes expect only Va per cent, ' '

On one point, however, all the forecasters agree: West German exports will have another good year. A new survey by the Chamber of Commerce reported that exports, which were “remarkably robust in difficult world circumstances,”' would continue . to support domestic growth. For the 8.D.1., however, every silver lining has its cloud. The Federation's president, Mr Rolf Rodenstock, claims that industry has exported more simply to reduce excess capacity. Export orders, he said, had been won at the expense, of profits. ■ The West German Economy, as-a whole, though, will benefit, shaking off last year’s currentaccount deficit of DM17.3 billion ($7.5 billion). The Government expects something close to balance this year. The five institutes forecast a surplus of about DMS billion. .

A stronger trade performance is already helping to boost the D-mark. It has been at or near the top of the European Monetary System for several months, and has risen by 4 per cent against the dollar since early April. This prompted the Bundes-

bank to relax its monetary grip. Earlier this month, it. abandoned its special Lombard rate, introduced in February, 1981, to support the D-mark and finance the current deficit • through capital inflows. The special rate was 12 per cent, when it was first introduced. The reduction in the Lombard rate to 9 per cent was meant as a signal to commercial banks to cut their interest, rates, on loans to industry. The banks were quick to oblige. ■. -The • Bundebank’s president, Mr Karl Otto Poehl, has had to

defend his monetary policy against critics who wanted deeper cuts sooner. He is.therefore delighted that the Bundesbank has succeeded in “uncoupling” its interest rates from • those in the United States. He now wants the West German Government to put its house in order and not. “stare 1 at the United States.” He has maintained all along that only a return to a ; current account • surplus can give the central bank enough leeway to bring down interest rates 'That time . has now come.