Bonn Puts Best Face on Mediocre Growth Outlook

Christian Democrats' weak polling results reflect slow production in German factories

AS Chancellor Helmut Kohl's embattled Christian Democrat-led coalition braces for an election year, government members are putting the best spin possible on Germany's economic prospects for 1994.

Economics Minister Guenter Rexrodt, for example, is predicting better times for the German economy, which has been mired in its worst recession since World War II. Mr. Rexrodt projects economic growth of between 0.5 percent and 1 percent this year. ``It is becoming clearer that the German economy has come out of the trough,'' he said last week.

But Rexrodt's upbeat economic assessment differs from those of several business associations, which have issued cautious forecasts for 1994. One group, the Savings Banks Association, says that while some optimism was justified, Germany's economic recovery this year will be slow and unsteady.

``A thorough economic recovery is unlikely to start before mid-year, and even then it could be comparatively weak considering the continuing structural problems of the German economy,'' the association says.

The different scenarios painted by government leaders and business associations might be explained, at least in part, by the numbers - polling data rather than production figures.

As October federal parliamentary elections approach, several polling organizations peg popular support for the governing coalition between 33 and 35 percent. The main opposition Social Democratic Party (SPD), meanwhile, would capture between 37 and 39 percent if elections were held today, polls indicate.

Many in Mr. Kohl's government realize that their electoral fate is largely linked with the economy. In his New Year's address, Kohl, who has led Germany for more than 11 years, sought to restore workers' confidence by pledging to make the fight against unemployment a top priority. Analysts predict that German unemployment totals this year could top 4 million, or about 10 percent of the work force. Currently, about 3.5 million are out of work. ``Safeguarding employment and creating new jobs - that is our common duty,'' Kohl said.

At the same time, the chancellor said Germany's competitiveness in the world market is slipping, requiring an overhaul of current economic practices.

``The preservation of our future places new restrictions on us. More and more people are aware that they [changes] are necessary,'' Kohl said. ``What we need are courage and a sense of reality, energy, and confidence.''

The German parliament last month approved initial cuts in the German social welfare safety net, a move that will save an estimated $12 billion in government spending. Kohl wants to save an additional $4 billion, according to some estimates.

An obvious target for cuts is the military. But Kohl said that due to the recent success of ultranationalists in Russian elections, as well as the ongoing war in the former Yugoslavia, German defense expenditures will not be drastically reduced.

``The armed forces will get what they need,'' he said.

SPD leaders, seeking to capitalize on current discontent, vow that they will reverse Kohl's welfare cutbacks if they come to power. Rudolf Scharping, the party leader, said in an interview in the Bild am Sonntag newspaper that the SPD's opposition to welfare cuts did not mean it favored increasing the government budget deficit, projected to be about 70 billion deutsche marks (about $40 billion) in 1994.

``I am staunchly against increased borrowing,'' Mr. Scharping said, adding that the welfare state needed modernization.