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FRANKFURT

Recession set to cost everyone €3,000

The recession is going to cost each person in Germany around €3,000 according to the German Institute for Economic Research (DIW).

Recession set to cost everyone €3,000
Photo:DPA

The DIW conducted an estimate on behalf of the Berlin daily paper Der Tagesspiegel, coming to the conclusion that it would take at least until 2011 for the economy to recover.

“The recession was extraordinarily steep, and would not have been nearly as bad if it was not for the financial crisis,” Stefan Kooths, economist at the DIW told the paper.

A global collapse was triggered by the failure of US bank Lehman Brothers on September 15 last year, leading to a credit crunch as financing dried up and banks needed significant capital injections from governments and central banks to stay afloat.

But the global economy was already in a downturn before this even happened, said Kooths. “It would have probably only have been a mild recession without that,” he suggested, with the German economy managing weak growth during 2009 and a slight contraction during 2010.

Now though, the government is predicting a reduction in gross domestic product of around six percent over this year. A slight improvement in the second quarter of the year prompted some to suggest the reduction could be around four percent.

Many economists are predicting a slight uptick next year, although around €250 billion in productivity has been lost through the recession, the DIW said.

“That is an enormous sum, a big drop in terms of living standards,” said Kooths. “The recession was much tougher due to Lehman – and the collapse of any bank with a similarly international network of connections would have probably had the same affect.”

International trade will be important for the recovery though, said Kooths. “Powerful growth rates will be needed if, by the end of 2011, the worst dents are going to be eliminated. The drive for this catch-up will have to above all come from abroad. Whether the global economy recovers fast enough for this is in no way certain.”

And he warned of further job cuts next year, as firms continue to be under pressure, with reduced order books.

He said that the fear of the next generation being saddled with enormous debts because the government has supported the banks and industry was not right. “The national debt has risen massively,” he said. “But Germany in total is not made poorer by this. The coming generations do not only inherit the debts, but also the government bonds [issued to raise the money].”

But the difficulties will arise when the next generation has to decide how to raise the money to service the debt. “That is not a pleasant inheritance,” Kooths said.

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MUNICH

Four injured as WWII bomb explodes near Munich train station

Four people were injured, one of them seriously, when a World War II bomb exploded at a building site near Munich's main train station on Wednesday, emergency services said.

Smoke rises after the WWII bomb exploded on a building site in Munich.
Smoke rises after the WWII bomb exploded on a building site in Munich. Photo: picture alliance/dpa | Privat

Construction workers had been drilling into the ground when the bomb exploded, a spokesman for the fire department said in a statement.

The blast was heard several kilometres away and scattered debris hundreds of metres, according to local media reports.

Images showed a plume of smoke rising directly next to the train tracks.

Bavaria interior minister Joachim Herrmann told Bild that the whole area was being searched.

Deutsche Bahn suspended its services on the affected lines in the afternoon.

Although trains started up again from 3pm, the rail operator said there would still be delays and cancellations to long-distance and local travel in the Munich area until evening. 

According to the fire service, the explosion happened near a bridge that must be passed by all trains travelling to or from the station.

The exact cause of the explosion is unclear, police said. So far, there are no indications of a criminal act.

WWII bombs are common in Germany

Some 75 years after the war, Germany remains littered with unexploded ordnance, often uncovered during construction work.

READ ALSO: What you need to know about WWII bomb disposals in Germany

However, most bombs are defused by experts before they explode.

Last year, seven World War II bombs were found on the future location of Tesla’s first European factory, just outside Berlin.

Sizeable bombs were also defused in Cologne and Dortmund last year.

In 2017, the discovery of a 1.4-tonne bomb in Frankfurt prompted the evacuation of 65,000 people — the largest such operation since the end of the war in Europe in 1945.

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