Germany, government sees recession in 2024

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The German economy, as the Bundesbank also indicated recently, may already be in a technical recession, with a GDP contraction in the third quarter, following the 0.1% drop in the April-June period. The crisis of its industry is exemplified by the crisis of the car industry and the country's most representative group, the Volkswagen, which is threatening the closure of plants in Germany (never happened in its history) and is preparing for a tough confrontation with the trade unions. But the difficulties are across the board, as shown by Intel's decision to postpone the construction of a new EUR 30 billion semiconductor plant.

With Germany stuck, the Eurozone loses the pull of its locomotive and pressure mounts on the ECB for a faster rate cut.

The coalition government, led by Chancellor Olaf Scholz, approved in July a package of measures to boost the economy. In it there is a bit of everything: tax relief, incentives to keep older people in the labour market and attract foreign skilled workers, permanent reduction of energy prices for industry, cutting red tape, and boosting public and private investments. Habeck, leader of the Greens and vice-chancellor, stated that these measures could add about half a percentage point to the growth rate, but several economic institutes consider this estimate very generous. The package must be approved by both houses of parliament by the end of the year.

The counter-trend in exports, which rose by 1.3% in August on a monthly basis and by o.1% on an annual basis (according to data released yesterday by Destatis), was not enough to change the general climate of weakness, even when combined with the rebound in industrial production, also in August.

According to Habeck, the economy could be helped out of the crisis by a reform of the debt brake in the state constitutions and the federal budget.

But the Minister of Finance, Christian Lindner (leader of the Liberals), immediately put his foot down: 'The state cannot buy growth with debt,' he said, adding that 'a recovery is based on confidence, motivation, entrepreneurial risk and innovative strength. The framework conditions in Germany are no longer suitable for this. Our economy has been shackled for years by bureaucracy and tax burdens, but also by planning and increasing redistribution policies'.