GERMANY

GENERAL ECONOMIC SITUATION OF GERMANY - 2001

Economic growth in Germany suffered considerably in 2001 as a result of drastic cutbacks in corporate investment and a major decrease in stocks. GDP increased by only 0.6 percent, the lowest rate since the recession in 1993. On a European scale, Germany ranks second from last, before Finland, in the table of economic growth.

Over the last few years, economic activity has slowed increasingly, as companies have invested less and less in equipment and construction. This decline has not been compensated by consumer expenditure by private households, which rose slightly last year in relation to 2000. Although exports were 5 percent higher, this figure still fell far short of the preceding year's boom of 16 percent. At the end of the year, the economic situation was characterized by stagnation and the uncertainty was significantly increased by the terrorist attacks of 11 September 2001.

The majority of forecasts predict economic growth of just under 1 percent for 2002. After a weak first half, a slight improvement in world economic conditions could spread to Germany from the United States and produce a gradual upturn in economic growth in the second half of the year.

The economic downturn is increasingly affecting the labour market. The number of people out of work once again rose beyond four million in January.

Consumption, production, trade, financial performance and investment

German pulp mills produced 874 000 tonnes of pulp in 2001, the same as in the preceding year. Imports of paper-grade pulp from abroad totalled 3.5 million tonnes. Only 390 000 tonnes were exported.

The economic development of the German paper industry was influenced by the low level of economic activity in Germany since the beginning of 2001. Production of paper and board declined 1.3 percent to 17.9 million tonnes and the volume of sales decreased by 1.7 percent as compared with the preceding year, to 17.8 million tonnes. However, this downturn must be viewed against the background of an exceptional 9 percent growth in production in the preceding year. Domestic sales suffered somewhat more from the low level of demand than did exports. German suppliers merely profited from the continuing high level of demand in Eastern Europe. Imports declined by 3.3 percent. Consumption similarly dropped by 2.5 percent, to 18.6 million tonnes and per capita consumption in Germany consequently declined to 226 kg.

The raw material markets have developed satisfactorily for the German paper industry. The market for recovered paper - the most important raw material in terms of volume - was characterized by a further rise in demand while prices remained relatively stable in 2001. After rising distinctly in 2000, the price of pulp dropped considerably in 2001 and appeared to stabilize in the fourth quarter. The markets for softwood and hardwood fibre remained balanced, while the market for sawmill by-products was somewhat strained.

The official producer price index shows an average value of 100.3 points for 2001 (1995 = 100) and is therefore 3.5 percent higher than the average value of 96.9 points for 2000. The highest level for 2001 was recorded in January with 103.4 points, as compared with 99.3 in July and 97.7 in December. The average price level consequently declined slightly with each successive month. The value of sales by the German paper industry dropped only marginally by 1.2 percent over the year, from €12.8 billion to €12.7 billion, albeit with a general downward tendency, particularly towards the end of the year.

In keeping with the overall economic situation, 2002 started out fairly average for the paper industry, too, but is expected to improve in the second half of the year as the economy picks up as a whole.

ISSUES OF PARTICULAR INTEREST

Environmental aspects such as carbon sequestration and substitution (Kyoto Protocol)

The draft European Union Directive on Emissions Trading dated 23 October 2001 also includes the pulp and paper industry among the energy-intensive branches starting in 2005. Since action has already been taken in the various member states to reduce CO₂ emissions - such as the voluntary agreement by German industry to protect the earth's climate - these must be taken into account in the improvements made to protect the climate. Participation must therefore be voluntary for those European Union member states which have already implemented such or similar measures. The draft European Union Directive should therefore be revised accordingly.

The voluntary agreement by German industry was updated in December 2000 with a promise to reduce the specific CO₂ emissions by German industry by 35 percent altogether by 2012, as referred to the base year 1990.

In 1998, the German pulp and paper industry had already surpassed its commitment to achieve a 22 percent reduction in specific CO₂ emissions by 2005 in relation to the base year 1990. For this reason, the agreement was extended until 2012 and a 35 percent reduction in specific CO₂ emissions included in 2000 within the framework of the aforementioned industry-wide commitment.

The German pulp and paper industry will continue its efforts to consistently implement every possible improvement in order to achieve these objectives.

Progress in sustainable forest management and certification

To date, 306 371 hectares of forest land have been certified in accordance with the FSC guidelines in Germany.

In 10 of the 16 German Länder, 5 350 012 hectares or 50 percent of the total forest land have been certified according to PEFC rules. Another Länder has indicated its support for PEFC as a certification system.

Fibres for the production of paper and board (thousand tonnes)

^* estimated

Paper and board (thousand tonnes)

* estimated