Berlin - German Chancellor Angela Merkel's government again ruled out Wednesday new steps to boost public spending to spur economic growth following a summit of business and labour leaders in Berlin Wednesday called in the wake of the global crisis. The meeting is the latest sign that the economic downturn has moved to centre stage in the campaign for Germany's September election as Merkel has attempted to sharpen her crisis management credentials.
Despite indications that the contraction in the world economy might be starting to plateau, this year's election is likely to be held against the backdrop of rising unemployment and the fallout from slumping economic growth.
While union leaders attending the meeting in Merkel's Berlin office again mounted a case for new fiscal measures, German Economics Minister Karl-Theodor zu Guttenberg said there was broad agreement at Wednesday's summit that additional budgetary steps were not necessary.
Instead, the focus of the Berlin meeting is expected to be on the current economic pressures facing Germany, as well as evaluating the effectiveness of the two government stimulus packages, which Berlin says are worth a total of 81 billion euros (106.9 billion dollars).
At a joint press conference with Guttenberg after the summit, German Finance Minister Peer Steinbrueck described the meeting as "an exchange of views on the economic situation" and which reached no decisions.
But ahead of the meeting, union chief Michael Sommer warned in a television interview that failure to launch a third economic stimulus package to help stabilize the nation's labour market risked fuelling "social unrest."
Following the meeting, Sommer insisted again that "considerably more needed to be done in the area of investment and support for the economy."
However, the head of Germany's influential industry association BDI Hans-Peter Keitel said there was agreement at the meeting that action had to be taken to ensure to shore as many jobs as possible next year.
Wednesday's Berlin meeting was the second Merkel has called since the global slump began to take shape in the final months of 2008.
It comes amid hopes that the trough in the global economic downturn might have been reached, with signs that cautious optimism is emerging about the prospects for the world economy in the run-up to the end of the year.
A closely watched German investor confidence index released Tuesday surged in April to near a two-year high, following the more positive news out of the crisis-hit world financial sector.
Germany's key forward-looking Ifo business confidence survey is also expected to report Friday a modest pickup in the mood in the country's boardrooms on the back of hopes of an economic turnaround by the end of the year.
But a stream of figures have shown German production and factory order books shrinking and the nation's export machine rapidly losing momentum as the global recession tightened its grip on the country's economy in the first months of the year.
The Washington-based International Monetary Fund said Wednesday it expects the German economy will contract by a hefty 5.6 per cent this year as the nation faces up to its worst downturn since World War II.
At the same time, unemployment has continued to climb despite the large number of companies taking advantage of government subsidized short-term work programs, which have allowed businesses to cut production without throwing workers onto the jobless queues.
Moreover, Labour Office chief Frank-Juergen Weise has warned that the earliest there was likely to be a pickup in the labour market was next year.
"The economic downturn is increasingly having an impact on the job market," Weise said. "There will be no revival in the second half of the year," he said.
