028 Chap. 2 GROUP MANAGEMENT REPORT ECONOMIC ENVIRONMENT Economic environment in 2007 In 2007, global growth continued its positive develop- ment of previous years. The eurozone again benefited from strong domestic demand. Exports remained strong despite the substantial appreciation of the euro. The second half of the year was characterized by the impact of the property crisis on financial markets and central banks were forced to intervene. In bond markets, the yields of 10-year US government bonds decreased substantially, while in the eurozone yields witnessed slight growth compared to 2006. Eurozone yields thus rose above U.S. level. The volatility of stock markets increased substantially. Strong global growth continued in the year 2007. The global economy expanded by 4.6 percent. The economic cycle, however, levelled off considerably in the U.S. while emerging countries, in particular, saw an increase. The eurozone reached a growth rate of 2.7 percent and experienced stronger growth than the U.S. for the first time since 2001. The impact of the marked euro appreciation in the second half of the year was thus well absorbed. Economic growth in Germany was about as strong as in the eurozone. Despite the increase of value-added tax by three percentage points early · In 2007, global growth continued its positive development of previous years. · The second half of the year was marked by the repercussions of the property crisis on financial markets which forced central banks to intervene. · Yields in the eurozone rose above U.S. level. The volatility of stock markets increased substantially. 2005 2006 2007 Source: datastream 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 World U.S. Eurozone Germany 4.0 4.6 4.6 3.1 2.9 2.2 2.9 2.7 1.6 Economic growth in selected regions since 2005 Figures in % 1.0 2.6 3.1 Economic growth in Germany in 2007: +2.6%