German advisers cut growth

The German government's panel of economic advisers - formerly known as "the five wise men" but now including one woman - released its autumn growth report Wednesday, revising its previous estimate of 1.9 percent down to 1.2 percent in 2014.

Next year, Germany's gross domestic product (GDP) was predicted to grow by 1 percent, the report, titled "More trust in market forces," said.

The downward revision was mainly caused by rising "geopolitical tensions" and "unfavorable conditions" in the euro currency area, the experts said. But they also said that current policies pursued by the grand coalition government of chancellor Angela Merkel had a "negative impact" on growth.

As the government was relying "more on re-distribution and less on efficiency," they especially criticized a recent reduction in the pension age for people with 45 years on the job, and the planned introduction of a national minimum wage. In addition, they described current state finances as "structurally unsustainable" for the long run. The panel urged a re-thinking of policies as long as the German economy was still "in good shape."

Merkel shrugs off criticism

During the presentation of the report to the German chancellor on Wednesday, Angela Merkel promised to "seriously study" the panel's recommendations. But she flatly rejected the criticism of an 8.50-euro ($10.6) per hour minimum wage planned to be launched in 2015.

"It's not easy to understand how a policy that has not yet come into force is dampening growth already now," she said.

Merkel also said a series of international crises were to blame for sluggish growth, and that the government was planning measures to counter their negative impacts.

Robust jobs market

In additional advice, the senior economists proposed lowering business taxes for startup companies and a reduction in income tax for the German middle class. Moreover, they urged the government to provide more funding for maintaining public infrastructure for which a redistribution of funds in the budget should be used rather than raising more debt.

In spite of their criticism of new labor market regulation, the panel expects more jobs to be created in Germany. This year, they said employment would rise to 42.6 million people, and to 42.8 million in 2015 - equivalent to a jobless rate of 6.7 percent.

The robust jobs market would bolster domestic spending as a main pillar of growth in Germany, the report said.

uhe/sgb (Reuters, AFP, dpa)