Deflation may mean lower prices but if people don't buy...
Published:
21 May 2003 y., Wednesday
The German government says it won't happen. The IMF says it could. German economic experts aren't sure. Is deflation about to hit Europe's biggest economy? The German government on Monday rebuffed a report by the International Monetary Fund claiming that Germany is at high risk for economic deflation.
"We do not see this danger," said Jörg Müller, spokesman for German Finance Minister Hans Eichel.
The IMF study, published on May 18, cited an annual inflation rate currently running at under 1 percent, contracting consumer demand and meager economic growth as some of the "many indicators that suggest deflationary factors are at work in Germany."
Growth in Europe's largest economy slowed to a meager 0.2 percent in the first quarter of 2003, and unemployment is currently at 7.7 percent. The situation is compounded by labor costs that have risen by three-quarters of a percent each year over the past five years, a banking sector in crisis and record numbers of bankruptcies nationwide.
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