OECD urges more German stimulus, signals budget hit

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BERLIN, March 31 (Reuters): The German government needs to step up its stimulus measures fast because of the severity of the downturn facing Europe's largest economy, the Organisation for Economic Co-operation and Development said Tuesday.
Chancellor Angela Merkel has so far refused to increase the government's fiscal response to the crisis, which Berlin says is worth some 81 billion euros over two years.
In its mid-term report, the OECD said the global slump would likely cause the German economy to shrink in 2009 nearly six times faster than the country's previous postwar nadir.
"Given the rapid deterioration in activity, further stimulus measures are needed and should be implemented quickly," the Paris-based OECD said. "Such measures should be temporary and be selected on the basis of their short-term impact."
The OECD sees German gross domestic product (GDP) shrinking by some 5.3 percent this year. The economy's worst annual showing since the war was a contraction of 0.9 percent in 1975.