On the eve of the world's largest computer and telecommunications fair, the CeBIT, Schroeder said Germany was counting on new technology to spur expansion and noted that he had agreed at a summit last month with Britain and France to work to promote research and development to strengthen the European economy.

"Europe must above all become stronger in the area of future technologies," he said.

The German economy contracted last year and is expected to grow between 1.5 and two growth in 2004, behind nearly all other countries in the 12-nation euro zone.

The picture looks similarly bleak in the high-tech industry.

Once renowned for its technological prowess, Germany is only now gradually emerging from a high-tech slump and is slipping behind most major nations, the German computer, telecommunications and new media association BITKOM said in Hanover.

The group reported that those sectors stagnated last year and would reach only 2.5 percent growth in 2004 to 131.4 billion euros (160 billion dollars) in turnover.

The year 2005 will only bring 3.7 percent growth in Europe's biggest economy, the group predicted.

Those figures compare with the 4.3-percent global growth for this year and the six percent in 2005 forecast by the European Information Technology Observatory.

The market in western Europe as a whole is also growing faster than Germany and is expected to increase turnover by 3.1 percent in 2004 and 4.4 percent next year. Spain has the strongest prospects with a 5.5 percent rise in sales awaited this year.

BITKOM President Willi Berchtold attributed Germany's relative weakness to a number of factors, including a chronic lack of highly skilled workers, slipping educational standards and increasingly restrictive loan policies at commercial banks.

"We won't be seeing the unique growth rates of the boom years in the late 1990s and 2000 any time soon, if ever again," Berchtold said.

"There is a series of unresolved social and economic problems -- just look at the rigid labor and wage system, the lack of educational and training opportunities. That all puts the brakes on growth."

Telecommunications services are expected to drive what growth there is in Germany at a rate of 4.3 percent this year and 4.3 percent again in 2005.

Land-line services using the broadband connection DSL are awaiting the strongest expansion with a 10.8 percent increase in sales, followed by mobile services at 6.5 percent.

While computer sales are expected to sink again as a whole this year, the industry is hoping for continued growth in the turnover in laptops. Some 40 percent of computers now sold in Germany are portable.

The high-tech industry traditionally looks to the CeBIT to jumpstart the business year, offering a chance for more than 6,000 exhibitors from 64 countries to unveil their newest wizardry and gadgets.

But in line with the business trend, the number of German exhibitors has fallen this year amid a further wave of insolvencies and cost-cutting.

However foreign countries, and Asian nations in particular, are due to be out in force with Taiwan sending 709 companies, the United States 222, Britain 198, China 189, South Korea 167 and Hong Kong 140 firms. Asian visitors are expected to make up a full 15 percent of the crowd.

Organizers have stepped up security in the wake of the Madrid bombings at the CeBIT, a seven-day event expected to draw more than 500,000 visitors. It opens its doors to the public Thursday.

SPACE.WIRE