German recession deepens

The German economy shrank by 2.1% in last year’s fourth quarter compared with the previous three-month period, government figures showed today.

The country’s Federal Statistical Office said today that it was the biggest quarterly decline since German reunification in 1990.

The preliminary figures show that the recession in Europe’s biggest economy deepened at the end of last year.

It was the third consecutive quarterly contraction in gross domestic product. In both the second and third quarters, the economy shrank by 0.5%.

Elsewhere, Australia’s parliament today passed an AU$42.5 (€21.7bn) stimulus package, overcoming opposition objections to a government plan to plunge the economy into record debt.

The package highlights the threat the downturn poses to Australia’s resources-based economy, which has shuddered to a near halt since the worldwide financial turmoil began mid-last year.

Prime minister Kevin Rudd’s revised crisis plan passed its final hurdle in the senate today by 30 votes to 28.

“The government understands the urgency of the economic challenges that Australia faces,” Mr Rudd told the House of Representatives after the Senate vote.

Opposition leader Malcolm Turnbull told the House of Representatives that the package was a “panic move”.

Mr Turnbull’s Liberal Party, which voted against the package, argued that less than half the money should be spent because Australia’s economy was stronger than most other developed countries.

The new initiatives, spread over four years, include building thousands of new houses and school rooms, and environmentally friendly measures such as providing householders with free home roof insulation.

It will also deliver cash sums to most Australians.

The package aims to support 90,000 jobs – through a combination of creating new positions and saving existing jobs – while boosting economic growth by half a percentage point to 1% in the current fiscal year. The plan also aims to turn an economic contraction in the following year to 0.75% growth, government documents said.

A leading business lobby group, Australian Chamber of Commerce and Industry, said in a statement the package will improve business confidence and certainty.

Data released this week showed business confidence in Australia is now weaker than during the last recession in the early 1990s.