Little by little, the sky brightens over the horizon. Six months ago, Germany’s government and main economic institutes forecast its economy would shrink 6 per cent this year, with pallid growth in 2010 of 0.5 per cent. Last week they revised the numbers up to a 5 per cent decline this year, with 1.2 per cent expansion next year. The change reflects improved outlooks for exports and unemployment. Given a double-digit contraction in exports, however, the projected bounceback seems hardly robust. There are good reasons for caution.

One is that government programmes that softened the downturn are ending. The €5bn scrappage scheme that produced a recession-busting 26 per cent increase in car sales, year on year, to the end of September, has already expired. As the European Central Bank noted in a critical assessment of such schemes last week, German surveys found about half of car buyers had brought forward purchases from next year or beyond. The hangover effect of the scheme’s withdrawal could lead to car sales dropping sharply in 2010, with knock-on effects for related industries. Companies will also reach the end of two-year short-time working subsidies that have helped restrain unemployment. They will need to be in expansionary mode to keep workers on.