According to Federal Statistical Office data, the German economy grew by 1.5 % quarter-on-quarter in the first quarter of 2011. Bundesbank President Dr Jens Weidmann said “the very welcome GDP growth estimate published today confirms our view that the German economy is on a solid growth path”. After the sharpest economic slump in post-war history, the economy has recovered faster than initially expected. Dr Weidmann believes that “the good condition of the German economy can be seen as an indication that a sustained upswing may follow”.

However, the Bundesbank President also warned against overestimating the surprisingly strong GDP result. “The result was predominantly shaped by catch-up and backlog effects following particularly cold weather during the winter months. Furthermore, a large proportion of the initial GDP estimates involve calculation results that are marked by assumptions”, Dr Weidmann explained. In the Deutsche Bundesbank’s estimation, the underlying cyclical trend is likely to be much lower.

Based on the data, Dr Weidmann noted that public finances are also currently improving at a faster-than-expected pace. “However, this should not be used as an opportunity to ease the consolidation course. Instead – given the high and sharply rising debt level as well as the foreseeable demographic burdens – deficits should be reduced more rapidly in the current very favourable economic situation”, Dr Weidmann emphasised. This would enable the mistakes of the past to be avoided and public finances to be put in order quickly and comprehensively in “good times”.