Jan 4

　　Germany’s rebounding economy will be the locomotive of Europe again by 2008, if not in 2007. That is the prognosis of several leading economic research institutes at the turn of the year. The government’s slow progress with economic reform seems irrelevant to business and investment growth. Unemployment is sinking.

　　The latest figures from the Federal Labour Agency released on Wednesday January 3rd confirmed that the dark days experienced in 2005, when some 5m were unemployed, are well and truly over. The number of jobless fell to just below 4m in November and, seasonally adjusted, were held to be roughly the same in December—that is nearly half a million fewer than in the same month the previous year. It also represents the biggest single drop in the jobless total since reunification.

　　For Germans who were hit with an increase in value-added tax (VAT) on January 1st that is some kind of consolation. Long lines formed at petrol stations the day before as drivers filled their tank at the old rate. In fact the VAT increase, from 16% to 19%, affects only around half the goods and services bought by the average household and will add an estimated 1.4% to inflation. Many retailers are holding prices steady, absorbing the VAT increase themselves, just to keep people buying.