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Germany is on its way to a RECESSION, the Bundesbank warns

Germany is on its way to a RECESSION, the Bundesbank warns

  • German GDP fell by 0.1 percent in the second quarter and the central bank warned today that industrial production is expected to shrink again in the current quarter
  • Two consecutive quarters of decline would mean the official start of a recession
  • It has led to Angela Merkel's relaxation of her strict budgetary policy

The German economy could enter a recession in the third quarter of 2019, the country's central bank warned today.

German GDP fell by 0.1 percent between April and June and today the Bundesbank in Frankfurt said that industrial production is also expected to shrink significantly in the current quarter & # 39 ;.

Two consecutive quarters of decline would signify the official start of a recession and growing concerns have led Chancellor Angela Merkel to relax her strict fiscal policy.

The current quarter ends just a few weeks before Britain leaves the EU on October 31, which could lead to further economic turmoil in the bloc.

The German economy could enter a recession in the third quarter of 2019, the central bank of the country warned today (pictured, cars for export and import into a port in Bremerhaven)

The German economy could enter a recession in the third quarter of 2019, the central bank of the country warned today (pictured, cars for export and import into a port in Bremerhaven)

The fear of a British recession is also increasing as the UK gets closer to a chaotic No Deal exit and GDP shrinks for the first time since 2012 in the second quarter.

However, the German delay suggests that the problems of Great Britain are not unique to the Brexit and the struggle of both countries against the backdrop of the escalating trade war between the US and China.

China's own economic slowdown has also weakened the German export-heavy economy, according to the central bank.

The news has given new life to the political debate between those who support the German government's balanced budget and those looking for more flexibility to breathe new life into the economy.

Germany can afford it on paper after five consecutive years of budget surpluses and interest rates for long-term loans that are very attractive to the federal government.

Various Social Democrats, subordinate partners in Merkel's coalition government, want Germany to use its reserves to finance a plan to combat global warming or infrastructure works.

Economists have also urged Berlin to save cash to prevent a recession, but the Chancellor Angela Merkel's government said earlier that things weren't bad enough to justify loosening the wallet.

Growing concerns about the German economy have led Chancellor Angela Merkel (shown last week in Berlin) to relax her strict fiscal policy

Growing concerns about the German economy have led Chancellor Angela Merkel (shown last week in Berlin) to relax her strict fiscal policy

Growing concerns about the German economy have led Chancellor Angela Merkel (shown last week in Berlin) to relax her strict fiscal policy

Referring to anonymous sources, Der Spiegel reported on Friday that the government was not going to continue to reserve money in the event of a recession.

That would mean giving up the so-called & # 39; black zero & # 39; doctrine to bind the German state to a balanced budget.

It is unlikely that the popular balanced budget rate will be abandoned, with large regional elections in September and October.

On Sunday, German Finance Minister Olaf Scholz pointed to a possible intervention and stated that Germany could face a new economic crisis & # 39; completely.

& # 39; It is sometimes important when things change completely, for example that we have sufficient strength to respond & # 39 ;, he said during an open house at the government.

& # 39; If we have debts in Germany that are less than 60 percent of our GDP, that is the strength we need to cope with a crisis & # 39 ;, he added.

Scholz pointed to the estimated € 50 billion ($ 55 billion) that the 2008-09 financial crisis had cost the German government.

& # 39; We must be able to collect that and we can collect it – that is the good news. & # 39;

With flexibility instruments, Berlin could use its large budget surplus of 1.7 percent of its GDP as early as September.

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