For 1999, growth in Euro-11 money supply in August 1999 over August 1998. Real GDP growth, which reached 2.2 percent in 1998, dropped to 1.4 percent in the first three quarters of 1999. Most German public and private forecasters estimate growth of around 2.5 percent for 2000, with the acceleration primarily export-led. Inflation is extremely low, partly as a result of deregulation in the electricity and telecommunications sectors. At the same time, economic growth in recent years has been below potential, and unemployment rates have been very high, with about 4 million people unemployed nationwide.
Unemployment is also about twice as high in eastern Germany as in the west.
Increased government outlays associated with German unification have put pressure on fiscal policy during the 1990s. The country's generous social welfare system was extended as a whole to eastern Germany, and the government further committed itself to raise eastern German production potential via public investment and generous subsidies to attract private investment. However, overall unit labor costs in eastern Germany are still quite high, as productivity growth has lagged behind wage increases. This process led to the higher unemployment in the east and resulted in a sharp increase in federal unemployment compensation costs. These transfers accounted for the dramatic ballooning of public sector deficits and borrowing since 1990, and contributed to the need for the current government's belt-tightening measures.