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German economy springs back to life in 2006

German economy springs back to life in 2006
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Economic growth in Germany staged a dramatic recovery in 2006 according to the latest official figures. The Berlin government credited increased domestic demand and productivity.

Economy Minister Michael Glos called the growth “impressive” and added there was every reason to “look forward with optimism.” The left-right coalition of Chancellor Angela Merkel is pushing forward with economic reforms and this week she said: “The goal is to anchor the turnaround we achieved last year and make it enduring.”

Europe’s largest economy expanded by 2.5% in 2006. In 2002 it was stagnant, in 2004 it shrank. Lacklustre growth of around 1% followed in 2004 and 2005.

Among the sectors that bounced back last year was the construction industry. It contributed 0.3% to German GDP growth after a decade stuck in recession.

Surveys show business confidence in the country is at its highest since the reunification of east and west in 1990.

The return to health of the German economy has seen unemployment drop steadily to 9.6% of the working population in December. At the end of 2005 it was at 11.1%.

The German government is also planning changes in various social programmes to head off rises in the payroll taxes that employers pay and which they complain discourage them from hiring.

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