Battered Germany is a lesson for Brown • OECD predicts American-led bounce

<a href=www.opinion.telegraph.co.uk>telegraph.co.uk

Whether or not the Iraq war was about oil, the post-war prospects depend on it. The price of the world's most precious commodity topped $30 a barrel at the start of last month, and pretty painful it felt, too, to those who use it, which means just about everyone.

Part of the rise was due to Sod's Law, the one that says that if one thing goes wrong, others will follow. Increased demand from the US military coincided with production shut-downs in Nigeria, civil unrest in Venezuela and (obviously) the disruption of production from Iraq.

The price surge produced hysterical headlines but (as was predicted here) the $30 barrel was a bear market waiting to happen, and now the forces that pushed up the price have gone into reverse. Yesterday Opec, the cartel which still tries to control the price, announced that $25 was fine by them, and they'd try and hold it there.

It looks a forlorn hope. The price is coming down, probably below $20, and perhaps well below. The boost this will give to the world economy underpins yesterday's relatively cheerful forecast from Jean-Philippe Cotis, chief economist at the OECD.

Is he right? Perhaps. After two years of stagnation and contraction, companies are mending their balance sheets and much of the surplus investment is being worked off, especially in the US. A recovery in business investment and world trade will follow, next year if not this.

For all its fine Paris premises, international reputation and pompous title, the Organisation for Economic Co-operation and Development is just another forecaster, but it comes nearer than most to agreeing with Gordon Brown's rosy view of prospects.

Our economy, it says, should grow by 2.6pc next year, too slow to prevent a further deterioration in the public finances, but fast enough to make us look good against our competitors. We will look positively racy when compared with the eurozone, where the OECD has chopped its forecast to just 1pc growth. In Germany, growth has almost stopped and thanks to the strength of the euro, prospects are getting worse.

A manufacturing economy in stagnation needs devaluation, not revaluation, but there's nothing the Bundesbank can do. Should Mr Brown need further convincing that his famous five tests to join the euro have not been passed, Germany provides a grim lesson. The single currency has been a thoroughly miserable experience for what was once Europe's most successful economy.