As Europeans enter this new era, the ground beneath them is shifting. Economists and government officials are much more worried about an economic slowdown this year than they were just six months ago. Having argued somewhat smugly that Europe would be only mildly affected by the financial crises sweeping through Asia, Russia and Latin America, government officials now admit they are troubled. Most economists have cut their aggregate growth estimates for the 11 countries in Euroland from more than 3 percent to about 2.5 percent or lower. In Germany, which accounts for nearly a quarter of the region's economic activity, some economists predict that growth will drop from about 3 percent in 1998 to just 1.7 percent this year.
Manufacturing companies are considerably more pessimistic.
German engineering and machine-tool companies have slashed their predictions for export growth from 7 percent to 4 percent. Chemical companies such as BASF and Hoechst are all reeling from lower prices and lower demand, mostly as a result of the problems in Asia. Much like the United States, Europe is flooded with low-cost imports as a result of currency devaluations from Asia and Latin America. While Europe still has a big trade surplus with the rest of the world, a rising tide of imports is cutting into local growth. He predicts that the shift in trade will reduce Europe's growth by about one-half of a percentage point, and bring it down to about 2 percent this year.