The fall in output accelerated at the beginning of 2009 and activity is expected to continue falling throughout 2009, though at a slowing pace. The annual decline in GDP growth is projected to amount to around 6% this year. Activity will slowly pick up in the course of 2010.

After a strong start into 2008, activity has contracted reflecting muted consumption and weakening export growth. Activity is projected to contract further in 2009 on the back of falling investment spending and weakness in the main trading partner economies. Private consumption will make a small positive contribution to growth because disinflation increases the purchasing power of past wage settlements. Activity is expected to pick up in late 2009 and return towards trend growth rates in the second half of 2010.

Is the German Wirtschaftswunder back? The tide has obviously turned for the better in what for most of the post-war period was indeed Europe's “wonder economy”: after years of very slow growth at the beginning of the decade, the EU’s largest economy has been experiencing a strong upswing since 2005. The reforms of recent years, notably on the labour market, are showing positive results with the unemployment rate falling to a seven-year low of around 7.5%.

Can cutting down on sugar subsidies lead to healthier trade competition and trimmer prices? The 2005 European Union market reforms aim to thin EU farmers’ sugar subsidies and cut out obsolete sugar mills. Sugar Policy Reform in the European Union and in World Sugar Markets maps out how this might work.

After slowing in the second quarter, growth has picked up in the third quarter on the back of strong domestic demand. The output gap is likely to be almost closed. Growth is projected to advance at near trend rates during 2008 and 2009. Following some near-term headwinds, unemployment may continue to edge down but at a much slower pace than in the recent past. The slower projected expansion largely reflects a diminishing contribution from net exports that is not fully compensated by stronger private consumption.

On 1 January, Germany took over the presidencies of the European Union and the G8. The last time our country had this dual-chair role was in 1999. Our basic goal this year is to address global challenges and to tap fully the opportunities of globalisation.

The interests and concerns of the EU and the G8 are by no means identical, but there are several areas where we can take the opportunity of our dual presidency to build useful synergies.

The picture of the German economy seems brighter than for quite some years. Should we feel confident?