Diw sees germany facing strong upswing

Diw sees germany facing strong upswing

The decisive factor here is domestic demand, said DIW head of economic research ferdinand fichtner. "Because of the good labor market, wages will rise strongly and thus significantly drive private consumption."

Despite the dip in growth during the winter, the companies had recently recruited new people, explained fichtner. Economic sentiment has brightened as the european debt crisis has been contained for now. Rising wages now also arrived in lower income classes, which were now also spend more. "Rich people save more. Poorer people, on the other hand, use the greater part of their income for consumption purposes."Last year, the german economy grew by 3 percent.

The DIW expects price increases to remain relatively high at around two percent this year and next due to rough demand. "For a strong upswing, however, inflation rates are anything but alarming." But the european central bank must remain vigilant.

The institute sees germany as the economic locomotive in europe. In many neighboring european countries, austerity programs are having a negative impact on economic development, but german imports will be cut, especially in the coming year, said fichtner. GDP in the euro zone will shrink by 0.4 percent this year, and grow by 0.9 percent next year.

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