MacSharry gloomy on Germany: Radical measures said necessary to boost Community growth rates

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RAY MacSHARRY, the former EC agriculture commissioner, yesterday challenged the German mark's role as the 'anchor' currency of the European Community, warning that Germany's recession was now structural rather than cyclical.

Painting a picture of a great power in decline, he warned that German cost-competitiveness was being rapidly eroded and unemployment there could spiral to 9 million. Industry was leaving for countries such as Czechoslovakia where labour costs in some sectors were as low as one tenth of German levels.

In his first big speech since leaving office last December, he said Germany's economic problems were 'being recognised as much more long-term than was (originally) forecast'. He was addressing an Irish Business and Employers' Confederation conference in Dublin on Europe, EC structural funds and the economy.

He said past EC employment initiatives had failed, and more radical measures such as reducing social charges on employers were needed if Community growth rates were to catch up with those in other trading blocs. He opposed enlargement of the Community to 25 or 30 states by the year 2000, saying this would intensify competitive pressures and uncertainty. Membership should stand at 16, allowing in Austria, Sweden, Norway and Finland. Other would-be members could enter a common trade zone.

Buoyant Irish growth forecasts came from the Organisation for Economic Co-operation and Development and a senior economic adviser to the Dublin government. The Paris- based economic think-tank said the republic's growth should rise from 2 per cent to 3 per cent in 1994.

Another prediction came from Professor John Fitzgerald of Dublin's Economic and Social Research Institute, which points to GNP growth accelerating to 5 per cent by 1997, with a continuing healthy trade surplus.

But with Irish emigration held down by the British recession, unemployment rates in Ireland will stay high, he said. The OECD warned the jobless rate could rise from the present 18 to a record 20 per cent.

It noted that January's devaluation of the punt offset progress in reducing Ireland's debt-GDP ratio, which would otherwise have fallen below 100 per cent.

Ireland now has the EC's lowest inflation rate at 0.9 per cent, according to figures published yesterday. Denmark has the second-lowest at 1.1 per cent, with Britain next at 1.3 per cent. Greece has the worst at 16.4 per cent.