Germany set for a two-year recession as crisis deepens

Germany looks set for a two-year recession as it cements its status as the ‘sick man of Europe’. 

As the country’s economy minister admitted ‘the situation is not satisfactory’, his department expects output to shrink 0.2 per cent in 2024, having previously pencilled in growth of 0.3 per cent. 

The once-mighty German economy – the biggest in Europe and for so long an industrial powerhouse – suffered a 0.3 per cent slump last year. 

It is now on course to be the worst performing economy in the G7 for two years in a row and is on course for its first two -year recession since 2002-03. 

‘The situation is not satisfactory,’ said economy minister Robert Habeck. ‘Since 2018, the German economy has not been growing strongly.’ 

The bleak update came as European Central Bank officials (ECB) hinted that interest rates in the eurozone will be cut for a third time this year next week. 

Francois Villeroy de Galhau, the head of the French central bank who sits on the ECB governing council, said: ‘Victory against inflation is in sight. A cut is very likely.’ 

He added: ‘By the way, it will not be the last.’ Germany’s once-mighty industrial sector was for a long time the driving force of the eurozone’s most powerful economy. 

But it was heavily reliant 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 riven by conflict. 

‘Early indications such as industrial production and the business climate suggest this phase will last into the second half of the year,’ said the economy ministry.

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