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Germany appears headed for a two-year recession as it cements its status as the “sick man of Europe.”
As the country’s Economy Minister admitted that “the situation is not satisfactory”, his department expects production to contract by 0.2 percent in 2024, having previously forecast growth of 0.3 percent.
The once-mighty German economy – Europe’s largest and for so long an industrial powerhouse – suffered a 0.3 percent decline last year.
Tough times: Political instability is taking its toll in Germany, with Chancellor Olaf Scholz’s government torn by conflict
It is now on track to be the worst-performing economy in the G7 for two years in a row and is headed for its first two-year recession since 2002-2003.
“The situation is not satisfactory,” said Economy Minister Robert Habeck. “Since 2018, the German economy has not grown strongly.”
The somber update came as European Central Bank (ECB) officials hinted that interest rates in the eurozone will be cut for the third time this year next week.
Francois Villeroy de Galhau, president of the French central bank and member of the ECB’s governing council, said: “Victory against inflation is in sight. A cut is very likely.
And he added: “By the way, it won’t be the last.” Germany’s once-mighty industrial sector was long the driving force behind the eurozone’s most powerful economy.
But it relied heavily on cheap Russian gas and has been plunged into crisis since the invasion of Ukraine sent energy costs soaring.
Household spending also remains depressed while political instability is taking its toll, with Chancellor Olaf Scholz’s government torn by conflict.
“Early indications, such as industrial production and the business climate, suggest that this phase will last until the second half of the year,” the Ministry of Economy stated.
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