UPDATE 1-Germany to return to growth in Q1 - ECB's Asmussen

Mon Feb 25, 2013 4:16pm EST

Related Topics

* German economy to return to growth in Q1

* Reforms needed to avoid becoming "sick man of Europe"

* Politicians not ECB must address firms' access to capital

BERLIN, Feb 25 (Reuters) - Germany's economy will return to growth in the first quarter of this year after contracting in the final three months of 2012, European Central Bank board member Joerg Asmussen said on Monday, echoing similar comments he made to Reuters last week.

But Europe's largest economy needed to reform or risk becoming the "sick man of Europe" again in five to 10 years, as it was branded in the late 1990s, Asmussen added in a speech.

"Early indicators ... point to a swift recovery (in Germany) and I would expect that we will see a return to positive quarterly growth already in the first quarter of the year," Asmussen said at a German savings banks event.

Asmussen told Reuters in an interview on Friday he expected German gross domestic product (GDP) growth in the first quarter to be "significantly better" than the 0.6 percent contraction in the fourth quarter when low exports and investments had an impact.

"That Germany is doing so well today is the result of the reforms of the past five to 10 years, and the name those reforms go by in the world is the 'Agenda 2010'," Asmussen said, referring to labour market reforms by Merkel's Social Democrat predecessor Gerhard Schroeder.

Germany still urgently needed to reform its education system and integrate migrants into the labour force, an even more important challenge as the German population ages, said the central banker and former German deputy finance minister.

It needed to ensure energy provision, modernise its tax system, address growing income inequality and make sure new infrastructure could be built and existing infrastructure maintained, he added.

Germany has faced a range of high-profile embarrassments over flagship projects that have run hugely over budget, have been delayed or have faced popular opposition, such as Berlin's planned new airport and a train station in Stuttgart.

Asmussen said while access to capital was no concern for German medium-sized companies - where only 15 percent of firms feared for their access in a recent study - it still remained a worry for firms elsewhere in the euro zone. However, this was down to politicians, not the ECB to address.

"(One) reason why banks don't offer credit is high risk aversion, for instance driven by a rising number of non-performing loans," Asmussen said.

"I believe that is a serious topic, but mostly for politicians. The ECB looks after liquidity for solvent banks, but we are not in charge of other aspects," he added.

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