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Germany's upbeat companies see the eurozone debt crisis and uncertainty over economic growth in the United States as the main risks for 2011, a Reuters poll of four major business groups showed on Dec 28. Buoyed by growing domestic demand that is helping the economy power ahead of weaker eurozone peers, however, the concerns contrast sharply with record confidence as business morale rose to its strongest level since 1991 in December.
-- See possible Chinese, US slowdowns as recovery risk
"It could look like the 'Financial Crisis, Take Two'," said Anton Boerner, head of Germany's main foreign trade group, BGA.
The risks, said the heads of the country's four main business associations, mean governments should avoid protectionism and enact reforms to ensure financial stability and growth.
"The biggest worries at the moment are clearly coming from the euro-zone debt crisis," said Hans Heinrich Driftmann, President of Germany's chamber of industry and commerce (DIHK).
EU leaders have spent most of 2010 trying to come up with successful measures to stop the region's debt crisis spreading, but Greece and Ireland have already been forced to seek bailouts and Portugal, Spain, Belgium and others are now in the spotlight.
Leaders from the bloc have applauded reforms implemented by Spain and Portugal to avert debt crises of their own, but concern over a wider impact remains.
The view was shared by Dieter Hundt, president of the German BDA employers' association, who also agreed that developments abroad would be another chief risk.
"Next to the fear of the unresolved debt and confidence crisis in the eurozone, one must look at the danger of a new recession in the US and the risk of China's economic momentum weakening," he added.
Economic indicators show the US economy has grown sturdier over the past months, and the consensus growth forecast has been marked up to project 2011 growth as faster than 2010's. Worries of a double-dip recession are still present but growing rare.
But with next year's recovery from the 2008 financial crisis still driven by developing countries, all eyes will focus on China, the main engine of world economic growth, to see how much of an expected global slowdown it can avert.
Turning to Germany's internal economic issues, Holger Schwannecke, General Secretary of the ZDH handcraft association voiced concern that rising taxes could put a damper on consumer spending.
"Rising taxes and social charges (could bring) setbacks to the domestic economy," he said. This meant that Germany needed to embark on a reform of its tax system, said the DIHK's Driftmann.
"Alongside budget consolidation, we finally need to begin a real tax reform, with simplification and relief particularly for the Mittelstand (small- and medium-sized companies) and corporate taxation," he said.

Copyright Reuters, 2011

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