After a possible short and shallow contraction of the economy at the beginning of this year, Germany will grow by 0.6 percent in 2012 and then by 2.2 percent in 2013, the German Institute for Economic Research (DIW) institute said in New Year forecasts.

But the institute’s head of economic research, Ferdinand Fichtner warned, “This will only happen if politicians come up with a convincing solution to the eurozone crisis in the next few months.”

Continued chaos in the 17-nation eurozone could lead to a “negative spiral of rising unemployment and falling demand” in Germany, Fichtner said.

The turmoil in the sovereign debt markets of several euro countries should lead to an overall shrinking of the eurozone’s economy in 2012, but it was also expected to recover the year after, to grow by one percent, the DIW said.

“If the debt crisis gets even worse and France, for example, becomes infected, then the recession could be significantly worse,” said Fichtner.

German Economy Minister Philipp Rösler also warned that growing risks to the global and eurozone economies could end up harming Europe’s powerhouse.

Speaking to business daily Handelsblatt, Rösler said the government’s next major economic report, due mid-January, would likely “confirm” the risks identified towards the end of last year.

AFP/jcw