Government Slashes Economic Growth Forecast

The German government on Friday slightly lowered its economic growth forecast for 2004 and 2005. German Economic and Labor Minister Wolfgang Clement announced in Berlin that he expected growth of 1.4 percent this year and between 1.5 and 2.0 percent for next year. The country's six leading economic institutes, however, have forecast growth of 1.5 percent for both years. Despite the downward revision in the expected growth rate, Clement said he was confident that Germany would next year manage to uphold the EU's Stability and Growth Pact, which underpins the euro. "Yes, we expect to achieve that goal," Clement said and added that Germany's budget deficit would shrink to 2.8 percent of gross domestic product in 2005. The Stability and Growth Pact stipulates that member countries' budget deficits may not exceed 3 percent of GDP. Germany has already violated the pact three years in a row.