By HANS GREIMEL, Associated Press

FRANKFURT, Germany (April 23, 2001 4:18 p.m. EDT http://www.nandotimes.com) - The German economy continued its tailspin in March, a leading survey indicated Monday, raising fears that Europe's faltering economic motor will undermine the continent's resistance to a gathering global slowdown.

The business climate in western Germany dropped to its lowest point in a year in March, after taking a big plunge in February, according to the esteemed Ifo Institute think tank, originators of the monthly survey.

The Ifo index has been on a clear downward path since May, putting pressure on the European Central Bank to cut interest rates in Germany and the other European countries using the euro common currency.

Lower interest rates make it cheaper for companies to borrow money to fund expansion, and a cut could insulate the region from an economic slump in the United States and Japan.

Ifo economist Gernot Nerb said a rate cut could help revive the German economy, but added that the current slowdown appears to be bottoming out anyway.

The Ifo Institute has been one of many German think tanks calling for a rate cut in recent weeks.

The ECB meets Thursday to weigh cutting rates, but economists are mixed on what it will do. The Frankfurt-based central bank, which manages monetary policy in the 12 countries using the euro, stunned markets when it kept its key interest rate unchanged at 4.75 percent at its last meeting April 11.

A slowdown in the German economy could spell trouble for its neighbors because Germany accounts for nearly 35 percent of the euro-region's economic output. Unlike many of the other euro-using countries, Germany's export-driven economy is heavily exposed to swings in the U.S. economy.

News of a continuing German slowdown comes just days after Europe's top economic ministers downplayed the spillover effects of the stumbling U.S. economy at a weekend summit in Sweden.

European Central Bank president Wim Duisenberg, who has resisted persistent calls to cut interest rates, said the U.S. slowdown would have only "limited" effect on Europe because the United States accounts for only 3 percent of external trade of the European Union.

German Finance Minister Hans Eichel also called the impact of the U.S. slowdown "minor."

On Wednesday, the EU head office will issue a forecast putting economic growth in the EU in 2001 at between 2.5 percent and 3.0 percent, down from a forecast of 3.2 percent made last fall.

Sources said it would be 2.7 percent. U.S. growth is not expected to exceed 2.5 percent.

European Commission President Romano Prodi said because the EU anticipates more robust growth than the United States, "we are really stressing the resilience" of the EU economy.

Some German business leaders remained upbeat despite by Monday's figures.

"Despite the risks to the global economy, there is no reason to be pessimistic because we have great potential to grow strongly and reduce unemployment," said Michael Rogowski, president of the Association of German Industry.

Rogowski leaned on the government to spur the economy by stripping away regulations and opening the door to greater competition. But he said the potential for a U.S. spillover was small because of "structural differences" between the European and American economies.

Personal Note: Hmm, the U.S., Japan and Germany, the three largest economies in the world. If I were to put the clues together, I'd say the global situation isn't as promising as the cheerleaders would lead us to believe.

-- Guy Daley (guydaley@altavista.com), April 24, 2001