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Strong German economy allows tax cuts, says Merkel

Thursday, October 06, 2016 - 01:57

Strong demand from euro zone countries and domestic customers drove a bigger than expected rise in German industrial orders in August, suggesting factories will contribute to growth in Europe's economic powerhouse in the coming months. As David Pollard reports, Chancellor Angela Merkel says she's confident the country's economy will remain strong, despite Brexit uncertainties.

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(UPSOT) (Germany) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "Germany's economy is in good shape at the moment..." Germany's in good shape, says Angela Merkel. And perhaps it is: a surprise jump in industrial orders easing concerns that Europe's biggest economy's on a slower path. Orders up one per cent in the month in August - buoyed by strong domestic and euro zone demand. After a string of weaker numbers over the summer. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "There are concerns over growth over the long-term. Still more work to do with respect to the German economic outlook, but certainly we have seen some encouraging signs." Germany's budgetary situation is encouraging too, according to the Chancellor in her Berlin speech. Which means a bit more fiscal flexibility. (SOUNDBITE) (Germany) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "It's having a positive effect. We will be able to implement a small tax relief, which will amount to six billion euros for 2017 and 2018." Brexit looms though. Negotiating Britain's exit from the EU won't be easy, she said. But the EU has to stick to its principles. (SOUNDBITE) (Germany) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "If we don't say that full access to the single market is linked to full acceptance of freedom of movement, then everyone in Europe will start doing what they want ...." If for now Brexit remains a political and economic threat for a Chancellor who faces a major electoral challenge next year. SOUNDBITE (English) SENIOR FX STRATEGIST, RABOBANK, JANE FOLEY, SAYING: "There is a lot of disharmony, dissatisfaction with the EU. Italy, France certainly come to mind. And in Germany, we have seen local elections which suggest that Merkel's political power has lost its standing because perhaps of her position on supporting immigration to the extent she has." But from her hosts, there was one thumbs up on the economy. The BDI industry association now raising its German growth forecast this year - to 1.9 percent from 1.7 previously.

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Strong German economy allows tax cuts, says Merkel

Thursday, October 06, 2016 - 01:57