Germany, Europe’s economic powerhouse, will escape recession this year despite the ongoing eurozone debt crisis and return to solid growth in 2013, one of the country’s top institutes said yesterday.

After a possible short and shallow contraction of the economy at the beginning of this year, Germany will grow by 0.6 per cent in 2012 and then by 2.2 per cent in 2013, the DIW institute said in New Year forecasts.

Nevertheless, the institute’s head of economic research, Ferdinand Fichtner, warned: “This will only happen if politicians come up with a convincing solution to the eurozone crisis in the next few months.”

Continued chaos in the 17-nation zone could lead to a “negative spiral of rising unemployment and falling demand” in Germany, Fichtner cautioned.

The turmoil in the sovereign debt markets of several euro countries should lead to an overall shrinking of the eurozone’s economy in 2012, but it too was expected to recover the year after, to grow by one per cent, the DIW said.

“If the debt crisis gets even worse and France, for example, becomes infected, then the recession could be significantly worse,” said Fichtner.

German Economy Minister Philipp Roesler also warned that growing risks to the global and eurozone economies could end up harming Europe’s powerhouse.

Speaking to business daily Handelsblatt, Roesler said the government’s next major economic report, due mid-January, would likely “confirm” the risks identified towards the end of last year.