remained sluggish in the second half of 2018, despite excellent labour market conditions and rising income levels. explaining this weakness is altogether more difficult – remember, economists are known for being particularly adept at explaining today why what they predicted yesterday hasn ’ t come to pass. one possible cause might be the sharp increase in crude oil prices – like me, you ’ ve probably been annoyed about the high pump prices for petrol and diesel. this throttled consumer purchasing power during the second half of the year. it was only in december that energy prices fell sharply. the relevant sentiment barometers are now pointing to a considerable deterioration in the business climate. the businesses surveyed reduced their expectations by far more than their assessment of the current situation, so the stream of bad news from germany ’ s economy might well continue for some time to come. and contrary to our december forecast, the dip in growth looks set to continue into the current year. so from today ’ s perspective, the german economy will probably grow at well below the potential rate of 1½ % in 2019. as you can see, i ’ m not trying to gloss things over. but at the same time, there ’ s no reason for excessive pessimism. to coin a phrase, one protracted dip in growth does not a crash make – in other words : i see neither an abrupt slump nor an extended spell of noticeably receding economic activity. despite the current bout of weakness, the economy as a whole is still on an expansion path. growth in germany is building off favourable financing terms, rising employment levels and 2 / 10 bis central bankers'speeches increasing wages. fiscal easing this year will add more stimulus still. for labour market developments in particular, the short - term fluctuations in activity are of secondary importance. what this means is that one of the engines of economic growth is still intact. gradually, the shortages in the labour market and substantial wage increases will also begin to stimulate domestic price pressures. all in all, i still believe that the outlook in our december forecast for the next two years is a realistic one. once the german economy has overcome the weak spell, it looks set to go back to growing at roughly the same pace as its capacity in 2020 and 2021. that said, uncertainty over the future path of the economy is strong, and the risks for germany are skewed to the downside. there are two main reasons for this. the first is that the global trade dispute still hasn ’ t been resolved. so there is

jens weidmann : the euro area in 2016 – crucial to set right course for enhancing growth and stability speech by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, at the international club la redoute e. v., bonn, 28 january 2016. * 1. * * introductory remarks grafin lambsdorff, ladies and gentlemen, thank you for your kind welcome and for inviting me to your club. i was pleased to accept your invitation. i am probably partial to requests to speak in bonn – and i mean that positively – due to my old ties to the university of bonn. after all, i studied here for a number of years and obtained a degree in economics and a phd here, thus acquiring a large chunk of my economic “ toolkit ” in this city. however, a more important reason for accepting your invitation was the fact that you regularly address current european policy topics. i am sure that we will therefore have a lively debate at the end of my speech. ladies and gentleman, as you know, 2016 is a leap year. there have been leap years since the time of julius caesar. they take account of the earth taking a little more than 365 days to orbit the sun. according to calculations by the greek astronomer hipparchus – which would have been known in caesar ’ s time – it took 5 hours, 55 minutes and 12 seconds longer, though he was a few minutes off according to modern - day calculations. there ended up being one leap year too many every 128 years ; as a result, by the mid - 16th century spring had been brought forward 10 days. this needed to be corrected, and pope gregory xiii did this with his gregorian calendar, which is still used today. the introduction of the gregorian calendar set the course for a calendar that keeps track with the seasons. when we talk today about setting the right course for a more stable and growthpromoting regulatory framework for monetary union, we get the impression that this requires a more complex process than the introduction of the gregorian calendar. but we merely need to take a leaf out of pope gregory xiii ’ s book of long - term thinking. we don ’ t need to look forward centuries in one fell swoop. it would already be a big step forward if we were to address the challenges looming in the coming years and decades. however, we have already been discussing the right course to set in europe for seven years