The European Commission expects the German economy to contract by a further 0.2 to 0.3 percent in 2010 after declining by 5.6 percent in 2009, according to a report in the German newspaper Die Welt. The Commission's forecast for 2010 is more pessimistic than the German government's recently revised target of an 0.5 percent increase for next year in Europe's largest economy.
The German government last week forecast that gross domestic product would contract by 6 percent in 2009. A group of leading economic institutes forecast last month that Germany's economy would contract by 6 percent in 2009 and shrink by a further 0.5 percent in 2010. EU Monetary Affairs Commissioner Joaquin Almunia is due to present forecasts in Brussels on Monday.
On Friday, a senior EU source told Reuters the Commission will forecast that the EU's collective budget deficit would soar to 6 percent of GDP this year. In 2008, the fiscal shortfall of the 27-nation European Union was 2.3 percent of GDP, but is bound to increase sharply as the recession hits government revenues and schemes to boost economic growth empty its coffers.