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. 

Challenging times: Political instability is taking its toll in Germany, with Chancellor Olaf Scholz’s government riven by conflict

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.

DIY INVESTING PLATFORMS

Easy investing and ready-made portfolios

AJ Bell

Easy investing and ready-made portfolios

AJ Bell

Easy investing and ready-made portfolios

Free fund dealing and investment ideas

Hargreaves Lansdown

Free fund dealing and investment ideas

Hargreaves Lansdown

Free fund dealing and investment ideas

Flat-fee investing from £4.99 per month

interactive investor

Flat-fee investing from £4.99 per month

interactive investor

Flat-fee investing from £4.99 per month

Get £200 back in trading fees

Saxo

Get £200 back in trading fees

Saxo

Get £200 back in trading fees

Free dealing and no account fee

Trading 212

Free dealing and no account fee

Trading 212

Free dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you

***
Read more at DailyMail.co.uk