German Economy

Look at the state of the economy from anywhere in America or Europe these days and all is gloomy: Governments deep in debt. Consumers reluctant to spend. Businesses afraid to hire. But gaze out from the vantage of some of the world's emerging economies and the picture gets brighter. Although few will pretend that their fates are immune to the ripples of a globalized economy, new players such as China, Brazil and India see their rising prosperity as less dependent on the credit cards of Western consumers.

A plan to beef up Europe's rescue fund for debt-bound nations won a crucial vote of confidence from Germany on Thursday but faced immediate criticism as being too little, too late to contain the spiraling crisis over the euro. Analysts welcomed the move to strengthen the bailout fund to about $600 billion, but they warned that a far larger fund and even a partial default by Greece will almost certainly be necessary to keep the crisis from swallowing up bigger nations such as Italy and Spain.

In moves that speak volumes about the times we live in, President Bush this week will try to boost the U.S. economy by applying pressure in Munich, Germany. Bush will demand that Germany lower interest rates to revive not only its own economy but those of the 11 other nations in the European Community.

Meeting with financial leaders from the world's biggest industrial democracies, Russia's economic policy-makers Saturday insisted that they are committed to reforms and have policies that can stabilize the country's runaway inflation. However, the finance ministers and central bankers from the so-called Group of Seven who heard the Russians' presentation voiced skepticism that the ambitious goals can be met.

Not much unites the German people, but the approaching arrival of the euro currency has just about the entire nation grousing in harmony. Even supporters of the ambitious project to replace 12 national currencies in Europe with a single legal tender are complaining about the costs and gritting their teeth over expected troubles when the new notes and coins come into circulation in about a month.

Every summer, Volkmar and Vera Kruger spend three weeks vacationing in the south of France or at a cool getaway in Denmark. For the other three weeks of their annual vacation, they garden or travel a few hours away to root for their favorite team in Germany's biggest soccer stadium. The couple, in their early 50s, aren't retired or well off. They live in a small Tudor-style house in this middle-class town about 30 miles northwest of Frankfurt. He's a foreman at a glass factory; she works part time for a company that tracks inventories for retailers.

The Bundesbank kicked off a fresh round of cuts in German interest rates by engineering the biggest drop in money market rates in four months. The cut in the securities repurchase rate to 4.45% from 4.50% was bigger than financial markets had expected and heralded deeper cuts in official rates, possibly today. "Rule One of Bundesbank watching is expect the unexpected," said Julian Jessop, an economist at HSBC Markets in London. "I wouldn't rule out a move" today.

German retail sales declined in November for the third straight month, a sign that growth in Europe's largest economy may have slowed in the final quarter of 2000. Sales fell 1.3% in November, the biggest decline since June, after dropping a revised 0.4% in October, the government said. Economists had expected a 0.3% gain in November.

The road to recovery for U.S. automakers could be jammed with hundreds of thousands of gas-guzzling used cars, which President Obama hopes will be traded in for more fuel-efficient vehicles -- with the lure of government money. So-called cash-for-clunkers programs in Germany and France have worked well this year to spur new car sales. But similar initiatives aimed at reducing smog in Southern California have not fared so well in recent years.

In a development likely to alter the balance of economic power in Europe and beyond for the foreseeable future, East and West Germans have started the enormous task of unifying their economies. The initial, unofficial cost estimates are staggering. While neither the East nor West German governments have made official projections, some of West Germany's most respected economists have suggested the final price tag for unification could easily top 1 trillion deutschemarks (more than $600 billion).