Germany is likely falling into recession as it grapples with the impact of strikes and its faltering transition to net zero, its central bank has warned.
The Bundesbank said Europe’s largest economy is facing an “ongoing period of weakness” that began with the Russian invasion of Ukraine.
It warned the economy is expected to contract again in the first three months of this year, plunging Germany into a recession.
It follows a 0.3pc decline in gross domestic product (GDP) in the final three months of 2023, compared with the previous quarter.
A recession is widely defined as two successive quarters of falling GDP.
In its latest report, the Bundesbank warned that “uncertainty regarding climate and transformation policy remains elevated” in Germany.
Chancellor Olaf Scholz’s government was plunged into crisis last year after a constitutional court blew a €60bn hole in its net zero budget, after ruling ministers could not repurpose unspent coronavirus emergency funds to fight climate change.
The Bundesbank added that the effects of various strikes “cannot be ruled out,” with farmers using their tractors to bring motorways and key routes to a standstill in protest to cuts in agricultural subsidies.
Germany would also suffer from a “downward trend” in foreign industrial demand and “cautious” consumer spending, the bank said, as well as higher funding costs for domestic investment.
It said: “Economic output is thus likely to once again decline slightly in the first quarter of 2024.”
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2024-02-19 12:56:00Z
CBMiaWh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDI0LzAyLzE5L2Z0c2UtMTAwLW1hcmtldHMtbGF0ZXN0LW5ld3MtaG91c2UtcHJpY2VzLW1vcnRnYWdlLXJhdGVzL9IBAA
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