Alarm bells in Europe raise the stakes for G7

ALARMING SIGNS of weakness in Europe's two biggest economies have raised the stakes at today's Group of Seven meeting in Bonn. Wim Duisenberg, president of the European Central Bank, will come under fresh pressure to cut Euroland interest rates.

Figures yesterday showed a shock fall in German GDP at the end of 1998, the first in national output for three years. Business confidence in Germany continued to deteriorate in January, the eighth successive month of decline. In addition manufacturing output in France fell sharply in December.

Analysts said the news improves the chance the ECB will cut rates in March. The markets believe the weakness of the euro since its launch 50 days ago explains ECB reluctance to lower borrowing costs.

The G7 meeting will be the first time Mr Duisenberg has had to face all his critics. Gordon Brown, the Chancellor of the Exchequer, will today back calls from US Treasury Secretary Robert Rubin for the Europeans to cut interest rates to boost demand. Mr Rubin said earlier this week that the disparities in growth between the US and its main trading partners was unsustainable.

The Chancellor and the Governor of the Bank of England, Eddie George, will point to the speed with which the UK has cut interest rates. Treasury officials said yesterday that all countries needed to play their part.

Yesterday's figures showed that German GDP fell by 0.4 per cent in the final quarter of 1998, taking growth for the year to 2.6 per cent from 2.3 per cent in 1997. A sharp fall in exports, down 3.4 per cent in the quarter, accounted for much of the weakness, but investment and government spending also fell.

The latest index of the business climate in Germany from Ifo, the economic research institute, declined to 91.1 in January from 91.4 in December, while the expectations index fell to 96.1 from 96.5.

In France, manufacturing output fell 0.7 per cent in December after a 0.1 per cent drop in November. The year-on-year growth in production slowed markedly to just 1.2 per cent.

Today in Bonn the Chancellor is expected broadly to support proposals by Hans Tietmeyer, Bundesbank President, for a new liaison committee linking central bank governments that could act as an early warning system.

Mr Tietmeyer is proposing a new forum with a small secretariat, which would co-ordinate the work of existing bodies and central banks.

The Chancellor is particularly keen that the various codes on transparency, compliance and supervision being drafted after the Asian and Russian crises are implemented rapidly.

Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all