Germany has unveiled what could be its most significant economic reform package in decades, aiming to revive growth and strengthen competitiveness in Europe's largest economy. But despite the scale of the proposed changes, financial markets have shown little enthusiasm. Why did investors barely react? Are these reforms a genuine attempt to fix structural challenges, or are they primarily a political move? We break down what Berlin has announced, what it means for the German economy, and why markets remain cautious.

Berlin reforms big, markets stay unmoved 

Germany's economy shrank for a second straight year in 2024, official figures showed Wednesday, with little hope of a speedy recovery as Europe's traditional powerhouse is also mired in political crisis.
Gross domestic product in Europe's largest economy fell 0.2 percent last year, according to preliminary figures from federal statistics agency Destatis, after a 0.3 percent contraction in 2023.
Germany has faced a perfect storm, with high energy costs battering its manufacturing sector, demand weak in China and other key export markets, and the economy facing deep-rooted structural problems including a shortage of skilled labour.&nbsp;
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Destatis president Ruth Brand said the economy suffered under both "cyclical and structural pressures" last year.
"These include increasing competition for the German export industry on key sales markets, high energy costs, an interest rate level that remains high, and an uncertain economic outlook," she said.
Preliminary data also showed that the economy had contracted 0.1 percent in the final quarter of last year compared to the previous quarter.&nbsp;
Fears are growing that the economy will struggle to get back on its feet this year, due in part to the political crisis at home.
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Following the collapse of Chancellor Olaf Scholz's coalition, Germany is heading for early polls on February 23, which is expected to be followed by a period of paralysis before a new coalition emerges.
<h2>Trump tariffs threat&nbsp;</h2>
The data released Wednesday -- in line with most forecasts, including from the government -- will be further bad news for Scholz, who has been criticised for failing to reboot the economy and already faces an uphill battle to win re-election.
US President-elect Donald Trump's threat to hit imports into the world's top economy with tariffs is adding to jitters for German exporters.
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In December, the German central bank slashed its growth projection for 2025 to a meager 0.2 percent from a previous estimate of 1.1 percent.&nbsp;
The Destatis data showed that the manufacturing sector declined markedly in 2024, highlighting the challenges for a traditional pillar of the economy, which has struggled since Russia's full-scale invasion of Ukraine in 2022 sending energy costs soaring.&nbsp;
Brand noted that the country's exports fell in 2024, even as global trade increased overall, adding that "the international competitiveness of the manufacturing industry faced further pressure".&nbsp;
<h2>'Sick man' again?&nbsp;</h2>
The last time Germany recorded two straight years in the red was 2002-2003 when the country was still seen as the "sick man" of Europe.
Relative success in the years that followed earned it a reputation as the powerhouse of the eurozone but Germany's economic motor has stalled since the coronavirus pandemic and outbreak of the Ukraine war.
Germany finds itself in the unusual position of having to bring up the rear in Europe in terms of growth -- the European Commission has predicted the overall eurozone economy to have grown by 0.8 percent in 2024, well above Germany's result.
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The country's economic woes have been reflected in a string of job cuts and poor results at leading companies throughout the year.&nbsp;
Volkswagen, Europe's biggest carmaker, has come to symbolise the problems facing German industrial titans. Last month, it announced plans to cut 35,000 jobs at home in the coming years as it battles high costs, and fierce competition in key market China.
Clashes between Scholz and his coalition partners over how to get the economy back on its feet were at the heart of the government's collapse in November.
Some hope a stronger government will emerge after February's election -- where center-right opposition leader Friedrich Merz is seen as the favourite to take over -- and be better able to turn the economy around.&nbsp;
Klaus Borger, an economist from public lender KfW, said bold actions were urgently needed.
"Besides containing the numerous global crises and uncertainties, what is needed above all are convincing answers from policymakers and companies to the huge transformative challenges, especially in industry," he said.&nbsp;
Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

World: GDP in Europe's largest economy fell 0.2 percent last year, as per preliminary figures from federal statistics agency Destatis, after a 0.3 percent contraction in 2023.

Germany's economy shrank for a second straight year in 2024, official figures showed Wednesday, with little hope of a speedy recovery as Europe's traditional powerhouse is also mired in political crisis. Gross domestic product in Europe's largest economy fell 0.2 percent last year, according to preliminary figures from federal statistics agency Destatis, after a 0.3 percent contraction in 2023. Germany has faced a perfect storm, with high energy costs battering its manufacturing sector, demand weak in China and other key export markets, and the economy facing deep-rooted structural problems including a shortage of skilled labour. Also read: ‘Say NO to Scholz,’ Musk declares as Germany decries election meddling Destatis president Ruth Brand said the economy suffered under both "cyclical and structural pressures" last year. "These include increasing competition for the German export industry on key sales markets, high energy costs, an interest rate level that remains high, and an uncertain economic outlook," she said. Preliminary data also showed that the economy had contracted 0.1 percent in the final quarter of last year compared to the previous quarter. Fears are growing that the economy will struggle to get back on its feet this year, due in part to the political crisis at home. Also read: Germany accuses Elon Musk of 'trying to influence' elections with AfD endorsements Following the collapse of Chancellor Olaf Scholz's coalition, Germany is heading for early polls on February 23, which is expected to be followed by a period of paralysis before a new coalition emerges. Trump tariffs threat The data released Wednesday -- in line with most forecasts, including from the government -- will be further bad news for Scholz, who has been criticised for failing to reboot the economy and already faces an uphill battle to win re-election. US President-elect Donald Trump's threat to hit imports into the world's top economy with tariffs is adding to jitters for German exporters. Also read: Germany to introduce Digital Schengen Visa for Indians from 2025 In December, the German central bank slashed its growth projection for 2025 to a meager 0.2 percent from a previous estimate of 1.1 percent. The Destatis data showed that the manufacturing sector declined markedly in 2024, highlighting the challenges for a traditional pillar of the economy, which has struggled since Russia's full-scale invasion of Ukraine in 2022 sending energy costs soaring. Brand noted that the country's exports fell in 2024, even as global trade increased overall, adding that "the international competitiveness of the manufacturing industry faced further pressure". 'Sick man' again? The last time Germany recorded two straight years in the red was 2002-2003 when the country was still seen as the "sick man" of Europe. Relative success in the years that followed earned it a reputation as the powerhouse of the eurozone but Germany's economic motor has stalled since the coronavirus pandemic and outbreak of the Ukraine war. Germany finds itself in the unusual position of having to bring up the rear in Europe in terms of growth -- the European Commission has predicted the overall eurozone economy to have grown by 0.8 percent in 2024, well above Germany's result. Also read: US economy expanded faster in third quarter than originally estimated: Data The country's economic woes have been reflected in a string of job cuts and poor results at leading companies throughout the year. Volkswagen, Europe's biggest carmaker, has come to symbolise the problems facing German industrial titans. Last month, it announced plans to cut 35,000 jobs at home in the coming years as it battles high costs, and fierce competition in key market China. Clashes between Scholz and his coalition partners over how to get the economy back on its feet were at the heart of the government's collapse in November. Some hope a stronger government will emerge after February's election -- where center-right opposition leader Friedrich Merz is seen as the favourite to take over -- and be better able to turn the economy around. Klaus Borger, an economist from public lender KfW, said bold actions were urgently needed. "Besides containing the numerous global crises and uncertainties, what is needed above all are convincing answers from policymakers and companies to the huge transformative challenges, especially in industry," he said. Disclaimer: This story has been published from a news agency feed with minimal edits to adhere to WION's style guide. The headline may have been changed to better reflect the content of the story or to make it more suitable for WION audience.

Germany economy shrinks for second consecutive year, leaves little hope for speedy recovery

Germany, once a beacon of economic stability in Europe, is now facing a growing crisis. The IFO business climate index, a key indicator of economic sentiment, has plummeted to its lowest level in months. This signals a significant downturn in the German economy.

Germany faces recession risk as economic indicators worsen

Germany's economy will take a while to recover from one of its worst annual performances in a generation, even if it does start growing again in 2024.

2023: Germany's weakest performance in a generation

Germany, once coveted by the entire world for its cutting-edge technologies and high standard of living, is now struggling to keep its economy moving in the direction of growth.

Tracking Germany’s rise & fall in the 21st century | World Business Watch

Germany once considered envy of the world for its cutting-edge technologies and high-quality of life is now struggling to keep its economy in a growth trajectory.

Why Germany is struggling with growth | State of German economy decoded | World DNA

Germany's crisis of labour is getting worse as increasing number of companies across Europe's largest economy face staff shortages, according to a latest business survey by the Munich-based Ifo Institute released on August 16.

The survey found more than 43 per cent of nearly 9,000 firms polled suffering from a lack of qualified workers in July — up from just over 42 per cent in April. The all-time high of almost 50 per cent was reached in July 2022.

"Despite a sluggish economy, many companies are still desperately searching for suitable employees," Ifo’s Stefan Sauer said in an emailed statement, Bloomberg reported.

Germany went through a period of recession during the winter of 2022 and 2023 after energy prices went up due to cumulative effects of the Russian offensive in Ukraine.

The inflation has since stagnated. It has also dragged down in particular by a decrease in manufacturing. But at present, the services sector is also emerging as particularly weak.

Also read |&nbsp;<a href="https://www.wionews.com/business-economy/worlds-fourth-largest-economy-germany-enters-recession-596490">Germany, world’s fourth-largest economy, enters recession</a>

Ifo said the service sector has been hit particularly hard, with three-quarters of legal and accounting companies are also not finding the applicants they need. There were also record shortages for transportation, architecture, and engineering.

Besides, nearly 41 per cent of machinery and equipment makers reported labour deficits. Overall number for the manufacturing industry improved slightly to just under 35 per cent.&nbsp;

Also watch |&nbsp;Germany's far-right party AFD wins first governing post

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The working-age population in Germany actually peaked towards the end of twentieth century. The country, however, has managed to ward off the demographic decline for last couple of decades due to arrival of millions of immigrants and the rising number of women going to work.&nbsp;

Both the trends are now subsiding as baby-boomers begin to retire.

<h2>What does it mean?</h2>

It simply means that the German economy will be more reliant on increasing the productivity of the workers amid growing anti-immigrant sentiment.

Politically, the far-right Alternative for Germany (AfD) is riding high in the polls and has been blamed for driving anti-immigrant push, a charge the AfD has vehemently denied.

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Germany's crisis of labour is getting worse as increasing number of companies across Europe's largest economy face staff shortages, according to a latest business survey by the Munich-based Ifo Institute released on August 16.

Germany's crisis of labour is getting worse as increasing number of companies across Europe's largest economy face staff shortages, according to a latest business survey by the Munich-based Ifo Institute released on August 16. The survey found more than 43 per cent of nearly 9,000 firms polled suffering from a lack of qualified workers in July — up from just over 42 per cent in April. The all-time high of almost 50 per cent was reached in July 2022. "Despite a sluggish economy, many companies are still desperately searching for suitable employees," Ifo’s Stefan Sauer said in an emailed statement, Bloomberg reported. Germany went through a period of recession during the winter of 2022 and 2023 after energy prices went up due to cumulative effects of the Russian offensive in Ukraine. The inflation has since stagnated. It has also dragged down in particular by a decrease in manufacturing. But at present, the services sector is also emerging as particularly weak. Also read | Germany, world’s fourth-largest economy, enters recession Ifo said the service sector has been hit particularly hard, with three-quarters of legal and accounting companies are also not finding the applicants they need. There were also record shortages for transportation, architecture, and engineering. Besides, nearly 41 per cent of machinery and equipment makers reported labour deficits. Overall number for the manufacturing industry improved slightly to just under 35 per cent. Also watch | Germany's far-right party AFD wins first governing post × The working-age population in Germany actually peaked towards the end of twentieth century. The country, however, has managed to ward off the demographic decline for last couple of decades due to arrival of millions of immigrants and the rising number of women going to work. Both the trends are now subsiding as baby-boomers begin to retire. What does it mean? It simply means that the German economy will be more reliant on increasing the productivity of the workers amid growing anti-immigrant sentiment. Politically, the far-right Alternative for Germany (AfD) is riding high in the polls and has been blamed for driving anti-immigrant push, a charge the AfD has vehemently denied. WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.

Germany's skilled labour shortage grows amid anti-immigrant push

Germany, the powerhouse of Europe, is facing serious challenges as its economy grapples with ongoing struggles. Despite being the continent's largest economy, Germany's growth engine seems to have stalled, and concerns are rising about its impact on Europe's overall prosperity.

Germany economy | Stagnation looms: Germany's long-term challenges persist | WORLD DNA

Germany, the largest economy in Europe, is facing serious challenges as its economy grapples with ongoing struggles. As concerns rise about the potential impact on Europe's overall prosperity, the nation's growth engine seems to have sputtered.&nbsp;

Despite initial optimistic forecasts, Germany has narrowly avoided a recession, but its industrial sector continues to languish, endangering the dynamism it has exhibited since the post-war era.

A series of ongoing challenges exacerbates the situation.

Firstly, an energy crisis has struck the country, stemming from the Ukraine war, which is now directly affecting manufacturers in an economy already contending with a demographic skills deficit and low productivity. The compounding effects of these issues are further hampering Germany's growth potential.

Moreover, the intensifying global competition in electric vehicles poses a significant threat to Germany's stronghold in the automaking sector. This situation demands immediate attention as the country's automotive skills and expertise face increasing pressure from competitors worldwide.

Another critical issue arises from the economy's heavy reliance on manufacturing gasoline-powered vehicles. While competitors race ahead with electric vehicle production, Germany faces the pressing need to adapt its automotive industry swiftly. A recent illustration of the consequences can be seen in Volkswagen's sales projections, which experienced a decline due in part to reduced Chinese orders.

Thomas Mayer, founder of the Flossbach von Storch Research Institute and a seasoned economic observer in Germany, emphasised that the pace of the economy's growth or decline is of secondary concern. As quoted by Bloomberg, he asserts that Germany needs to pay attention to more fundamental challenges and cautions that the country may unintentionally compete for the unwelcome title of the "Sick Man of Europe."

Economic slowdown in Germany, encouraging outlook for Italy in 2023

The industrial decline in Germany, revealed by S&amp;P Global's purchasing manager index, has overshadowed the continued expansion in the service sector, impacting not just the nation itself but also having repercussions on other economies within the region. Shockingly, Germany is expected to be the only G7 nation experiencing economic contraction this year, a situation that demands urgent attention and action.

Though the predicted full-year decline of 0.3 percent in Germany's GDP may not appear substantial, it holds significant implications. The fact that this will be the first time since 2003 when Germany's GDP decreases while Italy's increases,&nbsp;underlines the severity of the economic challenges facing the country.

This week, the IMF projected an encouraging outlook for Italy in 2023, and Italian Prime Minister Giorgia Meloni highlighted it. The projections indicate higher growth rates for Italy compared to Germany and France, signaling a delayed but promising economic comeback. Factors contributing to this positive outlook include a potential tourist boom and increased expenditure driven by the European Union.&nbsp;&nbsp;

In Germany, the economic slowdown is not just a forecast; its impact is already being felt in various industries. Manufacturers are facing significant challenges, and the country's heavy reliance on gasoline-powered cars while competitors accelerate their electric vehicle production is a pressing concern.

To tackle long-term growth concerns, the German government is taking proactive measures, offering subsidies to companies willing to establish factories. Through a generous €20 billion giveaway, the government aims to stimulate semiconductor manufacturing and provide crucial support to the technology sector. These efforts are geared towards rejuvenating economic momentum and ensuring a competitive edge in the face of evolving global markets.

(With inputs from agencies)

Germany, the largest economy in Europe, is facing serious challenges as its economy grapples with ongoing struggles. As concerns rise about the potential impact on Europe's overall prosperity, the nation's growth engine seems to have sputtered.

Germany, the largest economy in Europe, is facing serious challenges as its economy grapples with ongoing struggles. As concerns rise about the potential impact on Europe's overall prosperity, the nation's growth engine seems to have sputtered. Despite initial optimistic forecasts, Germany has narrowly avoided a recession, but its industrial sector continues to languish, endangering the dynamism it has exhibited since the post-war era. A series of ongoing challenges exacerbates the situation. Firstly, an energy crisis has struck the country, stemming from the Ukraine war, which is now directly affecting manufacturers in an economy already contending with a demographic skills deficit and low productivity. The compounding effects of these issues are further hampering Germany's growth potential. Moreover, the intensifying global competition in electric vehicles poses a significant threat to Germany's stronghold in the automaking sector. This situation demands immediate attention as the country's automotive skills and expertise face increasing pressure from competitors worldwide. Another critical issue arises from the economy's heavy reliance on manufacturing gasoline-powered vehicles. While competitors race ahead with electric vehicle production, Germany faces the pressing need to adapt its automotive industry swiftly. A recent illustration of the consequences can be seen in Volkswagen's sales projections, which experienced a decline due in part to reduced Chinese orders. Thomas Mayer, founder of the Flossbach von Storch Research Institute and a seasoned economic observer in Germany, emphasised that the pace of the economy's growth or decline is of secondary concern. As quoted by Bloomberg, he asserts that Germany needs to pay attention to more fundamental challenges and cautions that the country may unintentionally compete for the unwelcome title of the "Sick Man of Europe." Economic slowdown in Germany, encouraging outlook for Italy in 2023 The industrial decline in Germany, revealed by S&P Global's purchasing manager index, has overshadowed the continued expansion in the service sector, impacting not just the nation itself but also having repercussions on other economies within the region. Shockingly, Germany is expected to be the only G7 nation experiencing economic contraction this year, a situation that demands urgent attention and action. Though the predicted full-year decline of 0.3 percent in Germany's GDP may not appear substantial, it holds significant implications. The fact that this will be the first time since 2003 when Germany's GDP decreases while Italy's increases, underlines the severity of the economic challenges facing the country. This week, the IMF projected an encouraging outlook for Italy in 2023, and Italian Prime Minister Giorgia Meloni highlighted it. The projections indicate higher growth rates for Italy compared to Germany and France, signaling a delayed but promising economic comeback. Factors contributing to this positive outlook include a potential tourist boom and increased expenditure driven by the European Union. In Germany, the economic slowdown is not just a forecast; its impact is already being felt in various industries. Manufacturers are facing significant challenges, and the country's heavy reliance on gasoline-powered cars while competitors accelerate their electric vehicle production is a pressing concern. To tackle long-term growth concerns, the German government is taking proactive measures, offering subsidies to companies willing to establish factories. Through a generous €20 billion giveaway, the government aims to stimulate semiconductor manufacturing and provide crucial support to the technology sector. These efforts are geared towards rejuvenating economic momentum and ensuring a competitive edge in the face of evolving global markets. (With inputs from agencies)

Germany grapples with economic turmoil amid energy crisis & industrial decline

Germany, long touted as Europe’s growth engine and the world’s fourth largest economy, entered recession as its Gross Domestic Product fell 0.3 per cent in the first quarter of 2023. This follows a decline of 0.5 per cent in the fourth quarter of the last year, effectively pushing the country into a recession. Germany’s economy minister Robert Habeck blamed the country’s previous high dependency on Russian gas for the prevailing economic crisis. Speaking at an event in Berlin&nbsp;on Thursday,&nbsp;Habeck said, “We're fighting our way out of this crisis."

While two consecutive quarters of contraction fulfil the common definition of a recession, economists on the euro area business cycle dating committee employ a broader range of data, including employment figures, to assess economic downturns.

<h2>Why is Germany facing an economic crisis?</h2>

Germany is the worst-performing economy among G7 nations. Experts believe massive inflation has paralysed consumption growth in the country, which coupled with the persistent energy crisis has spelt doom for the economy.&nbsp;

Germany’s Federal Statistical Office noted, “The persistence of high price increases continued to be a burden on the German economy at the start of the year.” 
 
“This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023,” it added.

The country has also failed to sustainably serve the energy needs of its industrial sector, which is designed to produce the best output only when provided with Russian fuel. The political and business class of the country has failed to accommodate new challenges even as Russian fuel supplies remain throttled.&nbsp;

To solve the energy crisis, Berlin resorted to imposing a power price cap for some energy-intensive industries. However, that is also poised to further exacerbate the country’s inflation problem.

It is believed that the subsidies in fuel prices to some industries could cost taxpayers as much as $32 billion in the next seven years. The country has already shut down its nuclear power reactors, and plans to shut down its coal-fired power plants by 2030; however, its transition to cleaner modes of energy production has been very slow.

Although the Scholz administration has devised plans to install 625 million solar panels and 19,000 wind turbines by 2030, it fails to cope with the rising demand since almost everything in the country is being electrified, from heating to transportation.

<h2>How the recession in Germany will impact India</h2>

The recession in the German economy is definitely going to hit Indian exports, particularly in sectors such as apparels, footwear, and leather goods destined for the European Union's largest economy.&nbsp;

Exporters are expressing concerns about the repercussions this downturn will have on Indian exports, not only to Germany but also to other European countries experiencing a recessionary period.&nbsp;

Sharad Kumar Saraf, Chairman of Technocraft Industries and a Mumbai-based exporter, was quoted by Indian Express as saying that the long-term recession in Germany will likely result in a decline in Indian exports, with leather products, chemicals, and light engineering items being the most affected sectors.

In the 2022-23 fiscal year, India's exports to Germany amounted to USD 10.2 billion, and this figure is expected to dip as a result of the ongoing recession.

Watch:&nbsp;German economy shrinks over the last 6 months

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Ajay Srivastava, the co-founder of the economic think-tank GTRI, warned that the recession would adversely impact India's exports worth at least $2 billion, including smartphones, apparels, footwear and leather goods. During a recession, daily-use products are typically the first to be affected. Furthermore, the soon-to-be-imposed carbon border tax by Germany will also impact the export of iron and steel products.

Narendra Goenka, Chairman of the Apparel Export Promotion Council (AEPC), raised concerns about the recession in Germany affecting order flows into India. He predicted that business would decline by a minimum of 10 per cent, leading to a definite impact on investment flows from Germany.&nbsp;

However, Saraf mentioned that German investments in India may not be significantly affected, as German companies often seek cheaper alternatives during recessionary conditions.

<a href="https://www.wionews.com/business-economy/worlds-fourth-largest-economy-germany-enters-recession-596490">Also Read |&nbsp;Germany, world’s fourth-largest economy, enters recession</a>

Yogesh Gupta, Regional Chairman of the Federation of Indian Export Organizations (FIEO) in the Eastern Region, noted that Germany serves as the primary growth driver for the European Union. Therefore, a recession in Germany is expected to have an impact on purchasing activities within the European nation. However, Gupta cautioned that it is still too early to accurately determine the extent of the recession's impact on Indian exports.

<h2>What does India export to Germany?</h2>

In the 2022-23 fiscal year, India's exports to Germany spanned several sectors, from machinery and electronics to footwear and auto components. India’s exports to Germany included machinery worth $1.5 billion, electronics worth $ 1.2 billion, smartphones worth $458 million, apparels worth $990 million, organic chemicals worth $822 million, footwear worth $332 million, leather goods worth $305 million, articles of iron and steel worth $474 million, and auto components worth $406 million. So, India’s exports to EU nations could take a hit for the aforementioned sectors.&nbsp; 
&nbsp;

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Germany, long touted as Europe’s growth engine and the world’s fourth largest economy, entered recession as its Gross Domestic Product fell 0.3 per cent in the first quarter of 2023.

Germany, long touted as Europe’s growth engine and the world’s fourth largest economy, entered recession as its Gross Domestic Product fell 0.3 per cent in the first quarter of 2023. This follows a decline of 0.5 per cent in the fourth quarter of the last year, effectively pushing the country into a recession. Germany’s economy minister Robert Habeck blamed the country’s previous high dependency on Russian gas for the prevailing economic crisis. Speaking at an event in Berlin on Thursday, Habeck said, “We're fighting our way out of this crisis." While two consecutive quarters of contraction fulfil the common definition of a recession, economists on the euro area business cycle dating committee employ a broader range of data, including employment figures, to assess economic downturns. Why is Germany facing an economic crisis? Germany is the worst-performing economy among G7 nations. Experts believe massive inflation has paralysed consumption growth in the country, which coupled with the persistent energy crisis has spelt doom for the economy. Germany’s Federal Statistical Office noted, “The persistence of high price increases continued to be a burden on the German economy at the start of the year.” “This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023,” it added. The country has also failed to sustainably serve the energy needs of its industrial sector, which is designed to produce the best output only when provided with Russian fuel. The political and business class of the country has failed to accommodate new challenges even as Russian fuel supplies remain throttled. To solve the energy crisis, Berlin resorted to imposing a power price cap for some energy-intensive industries. However, that is also poised to further exacerbate the country’s inflation problem. It is believed that the subsidies in fuel prices to some industries could cost taxpayers as much as $32 billion in the next seven years. The country has already shut down its nuclear power reactors, and plans to shut down its coal-fired power plants by 2030; however, its transition to cleaner modes of energy production has been very slow. Although the Scholz administration has devised plans to install 625 million solar panels and 19,000 wind turbines by 2030, it fails to cope with the rising demand since almost everything in the country is being electrified, from heating to transportation. How the recession in Germany will impact India The recession in the German economy is definitely going to hit Indian exports, particularly in sectors such as apparels, footwear, and leather goods destined for the European Union's largest economy. Exporters are expressing concerns about the repercussions this downturn will have on Indian exports, not only to Germany but also to other European countries experiencing a recessionary period. Sharad Kumar Saraf, Chairman of Technocraft Industries and a Mumbai-based exporter, was quoted by Indian Express as saying that the long-term recession in Germany will likely result in a decline in Indian exports, with leather products, chemicals, and light engineering items being the most affected sectors. In the 2022-23 fiscal year, India's exports to Germany amounted to USD 10.2 billion, and this figure is expected to dip as a result of the ongoing recession. Watch: German economy shrinks over the last 6 months × Ajay Srivastava, the co-founder of the economic think-tank GTRI, warned that the recession would adversely impact India's exports worth at least $2 billion, including smartphones, apparels, footwear and leather goods. During a recession, daily-use products are typically the first to be affected. Furthermore, the soon-to-be-imposed carbon border tax by Germany will also impact the export of iron and steel products. Narendra Goenka, Chairman of the Apparel Export Promotion Council (AEPC), raised concerns about the recession in Germany affecting order flows into India. He predicted that business would decline by a minimum of 10 per cent, leading to a definite impact on investment flows from Germany. However, Saraf mentioned that German investments in India may not be significantly affected, as German companies often seek cheaper alternatives during recessionary conditions. Also Read | Germany, world’s fourth-largest economy, enters recession Yogesh Gupta, Regional Chairman of the Federation of Indian Export Organizations (FIEO) in the Eastern Region, noted that Germany serves as the primary growth driver for the European Union. Therefore, a recession in Germany is expected to have an impact on purchasing activities within the European nation. However, Gupta cautioned that it is still too early to accurately determine the extent of the recession's impact on Indian exports. What does India export to Germany? In the 2022-23 fiscal year, India's exports to Germany spanned several sectors, from machinery and electronics to footwear and auto components. India’s exports to Germany included machinery worth $1.5 billion, electronics worth $ 1.2 billion, smartphones worth $458 million, apparels worth $990 million, organic chemicals worth $822 million, footwear worth $332 million, leather goods worth $305 million, articles of iron and steel worth $474 million, and auto components worth $406 million. So, India’s exports to EU nations could take a hit for the aforementioned sectors. WATCH WION LIVE HERE ×

Explained | How recession in Germany will impact the Indian economy

World’s fourth-largest economy and Europe’s largest, Germany, has entered into recession after the country’s GDP recorded its second quarterly contraction.

The country’s Gross Domestic Product (GDP) from January to March quarter fell by 0.3 per cent, data released by the Federal Statistical Office on Thursday showed. This was the second consecutive drop from the last quarter of 2022, which showed a GDP fall of 0.5 per cent. Two consecutive quarters of decline constitute a technical recession.

The figures come as a major blow to the German government after it last month estimated double growth for this year.

German&nbsp;GDP data showed "surprisingly negative signals," Finance Minister Christian Lindner said on Thursday. He added that comparing Germany with other highly developed economies, the economy was losing potential for growth.

"I don't want Germany to play in a league in which we have to relegate ourselves to the last positions," he said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries.

Experts say that high inflation contributed to the recession, with prices in April spiking by 7.2 per cent than a year ago.

Germany’s inflation rate is above Europe’s average but below the UK's 8.7 per cent.

<h2>Inflation spiking in Germany</h2>

Data from the statistics office showed that German households decreased their spending in the first quarter, with final consumption expenditure falling 1.2 per cent over that period. Industrial orders were also weaker, reflecting the impact of higher energy prices on businesses. Government spending also witnessed a drop in the first three months of the year.

"The persistence of high price increases continued to be a burden on the German economy at the start of the year," the federal statistics agency Destatis said in a statement.

<h2>Germany enters recession after GDP falls for second successive quarter</h2>

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The latest economic development comes in the wake of high inflation and high-interest rates across the region. The European Central Bank (ECB) is expected to raise rates again at its next meeting on June 15. The central bank has lifted its rates by 375 basis points since July.

Earlier this week, German Central Bank Governor Joachim Nagel said that the ECB has “several” more rate increases ahead.

<h2>Less bleak than anticipated?</h2>

Germany, which is heavily reliant on Russian energy, struggled to look for alternative sources as the West-led sanctions following the Russian invasion of Ukraine in February 2022 continued to put a toll on its economy.

A mild winter in Germany meant that the worst scenarios — such as a gas shortage, which would have ravaged the economy — did not occur.

Germany's last recession came as the COVID-19 pandemic at the start of 2020 prompted governments to effectively shutter whole sectors of the economy.

(With inputs from agencies)

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World’s fourth-largest economy and Europe’s largest, Germany, has entered into recession after the country’s GDP recorded its second quarterly contraction. The country’s Gross Domestic Product (GDP) from January to March quarter fell by 0.

World’s fourth-largest economy and Europe’s largest, Germany, has entered into recession after the country’s GDP recorded its second quarterly contraction. The country’s Gross Domestic Product (GDP) from January to March quarter fell by 0.3 per cent, data released by the Federal Statistical Office on Thursday showed. This was the second consecutive drop from the last quarter of 2022, which showed a GDP fall of 0.5 per cent. Two consecutive quarters of decline constitute a technical recession. The figures come as a major blow to the German government after it last month estimated double growth for this year. German GDP data showed "surprisingly negative signals," Finance Minister Christian Lindner said on Thursday. He added that comparing Germany with other highly developed economies, the economy was losing potential for growth. "I don't want Germany to play in a league in which we have to relegate ourselves to the last positions," he said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries. Experts say that high inflation contributed to the recession, with prices in April spiking by 7.2 per cent than a year ago. Germany’s inflation rate is above Europe’s average but below the UK's 8.7 per cent. Inflation spiking in Germany Data from the statistics office showed that German households decreased their spending in the first quarter, with final consumption expenditure falling 1.2 per cent over that period. Industrial orders were also weaker, reflecting the impact of higher energy prices on businesses. Government spending also witnessed a drop in the first three months of the year. "The persistence of high price increases continued to be a burden on the German economy at the start of the year," the federal statistics agency Destatis said in a statement. Germany enters recession after GDP falls for second successive quarter The latest economic development comes in the wake of high inflation and high-interest rates across the region. The European Central Bank (ECB) is expected to raise rates again at its next meeting on June 15. The central bank has lifted its rates by 375 basis points since July. Earlier this week, German Central Bank Governor Joachim Nagel said that the ECB has “several” more rate increases ahead. Less bleak than anticipated? Germany, which is heavily reliant on Russian energy, struggled to look for alternative sources as the West-led sanctions following the Russian invasion of Ukraine in February 2022 continued to put a toll on its economy. A mild winter in Germany meant that the worst scenarios — such as a gas shortage, which would have ravaged the economy — did not occur. Germany's last recession came as the COVID-19 pandemic at the start of 2020 prompted governments to effectively shutter whole sectors of the economy. (With inputs from agencies)

Germany, world’s fourth-largest economy, enters recession

Germany's statistics office on Thursday released data for Europe's largest economy, marking the country's second contraction in as many months.

German economy shrinks over the last 6 months | Guest Interview

The German government is set to hike its inflation forecast for this year to 6.1 per cent&nbsp;due to the impact of the war in Ukraine, up from 3.3 per cent&nbsp;it had forecast in January, according to government document seen by Reuters on Monday.

Berlin, which is due to present its spring economic forecasts on Wednesday, sees consumer price growth easing to 2.8 per cent&nbsp;in 2023, the document showed.

German annual inflation rose to its highest level in more than 40 years in March as prices of natural gas and oil products soared following Russia's invasion of Ukraine, and gas and electricity bills for German households signing new contracts hit a record high last month.&nbsp;

Also read |&nbsp;<a href="https://www.wionews.com/world/they-can-win-if-they-have-the-right-equipment-says-us-defence-secretary-after-meeting-zelensky-473596">With right equipment, Ukraine can win war, says US defence secy Austin after meeting Zelensky</a>

Germany's ruling coalition announced relief measures last month worth roughly 16 billion euro ($17.2 billion) to help consumers cope with soaring energy costs and to reduce dependence on Russian gas.

April inflation data is due to be published on Thursday.

The German government's spring forecasts see consumer spending jumping by 9.7 per cent&nbsp;this year, 0.6 per cent&nbsp;points more than forecast in January, the document showed. In 2023, consumer spending will grow more slowly at a rate of 4.8 per cent.

Berlin meanwhile sees the savings rate shrinking to 10.9 per cent&nbsp;from 15.0 per cent&nbsp;last year.

Watch |&nbsp;Russia-Ukraine conflict: German Chancellor faces criticism for Ukraine stance

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A survey showed last week that one in 10 consumers in Germany were dipping into their savings to shoulder rising costs. Especially younger consumers aged 25 to 34 were more likely to say they were saving less or had taken out loans to help pay their bills.

The sharp rise in energy prices is also hitting companies. An Ifo survey published on Monday showed that nearly half of German companies planned to reduce investments due to rising energy costs.

Also read |&nbsp;<a href="https://www.wionews.com/world/france-germany-sold-weapons-to-russia-after-crimea-conflict-report-473135">France, Germany sold weapons to Russia after Crimea conflict: Report</a>

German business morale unexpectedly rose slightly in April, following a big drop in March, as companies were less pessimistic after the economy appeared resilient following the initial shock of the war in Ukraine.

However, the government's spring forecasts show that the unemployment rate is expected to decline to 5.0 per cent&nbsp;this year from 5.7 per cent&nbsp;in 2021 and to remain stable next year.

The government is also set to cut on Wednesday its growth expectations for Europe's biggest economy for 2022 to 2.2 per cent&nbsp;from 3.6 per cent , a source had told Reuters on Friday. Berlin sees growth picking up slightly to 2.5 per cent in 2023, the source had said.

The German government is set to hike its inflation forecast for this year to 6.1 per cent due to the impact of the war in Ukraine, up from 3.3 per cent it had forecast in January, according to government document seen by Reuters on Monday.

The German government is set to hike its inflation forecast for this year to 6.1 per cent due to the impact of the war in Ukraine, up from 3.3 per cent it had forecast in January, according to government document seen by Reuters on Monday. Berlin, which is due to present its spring economic forecasts on Wednesday, sees consumer price growth easing to 2.8 per cent in 2023, the document showed. German annual inflation rose to its highest level in more than 40 years in March as prices of natural gas and oil products soared following Russia's invasion of Ukraine, and gas and electricity bills for German households signing new contracts hit a record high last month. Also read | With right equipment, Ukraine can win war, says US defence secy Austin after meeting Zelensky Germany's ruling coalition announced relief measures last month worth roughly 16 billion euro ($17.2 billion) to help consumers cope with soaring energy costs and to reduce dependence on Russian gas. April inflation data is due to be published on Thursday. The German government's spring forecasts see consumer spending jumping by 9.7 per cent this year, 0.6 per cent points more than forecast in January, the document showed. In 2023, consumer spending will grow more slowly at a rate of 4.8 per cent. Berlin meanwhile sees the savings rate shrinking to 10.9 per cent from 15.0 per cent last year. Watch | Russia-Ukraine conflict: German Chancellor faces criticism for Ukraine stance A survey showed last week that one in 10 consumers in Germany were dipping into their savings to shoulder rising costs. Especially younger consumers aged 25 to 34 were more likely to say they were saving less or had taken out loans to help pay their bills. The sharp rise in energy prices is also hitting companies. An Ifo survey published on Monday showed that nearly half of German companies planned to reduce investments due to rising energy costs. Also read | France, Germany sold weapons to Russia after Crimea conflict: Report German business morale unexpectedly rose slightly in April, following a big drop in March, as companies were less pessimistic after the economy appeared resilient following the initial shock of the war in Ukraine. However, the government's spring forecasts show that the unemployment rate is expected to decline to 5.0 per cent this year from 5.7 per cent in 2021 and to remain stable next year. The government is also set to cut on Wednesday its growth expectations for Europe's biggest economy for 2022 to 2.2 per cent from 3.6 per cent , a source had told Reuters on Friday. Berlin sees growth picking up slightly to 2.5 per cent in 2023, the source had said.

Germany to hike 2022 inflation forecast to 6.1%: Report

The EU’s GDP is set to contract by close to 8 per cent in 2020 thanks to the Covid-induced disruption, even as the Covid death toll has crossed 130,000.

Recovery signs for EU's largest economy | Industrial activity picked up slowly

Germany’s economy may recover from October onwards from the coronavirus pandemic, Economy Minister Peter Altmaier said in a newspaper interview on Sunday.

Germany growth outlook improves; Over 5% growth possible in 2021

A slump in exports sent Germany's economy into reverse in the second quarter, data showed, as its manufacturers bore the brunt of a global slowdown amplified by tariff conflicts and uncertainty over Brexit.

A slump in exports sent Germany's economy into reverse in the second quarter, data showed, as its manufacturers bore the brunt of a global slowdown amplified by tariff conflicts and uncertainty over Brexit. Gross domestic product (GDP) fell 0.1per cent quarter-on-quarter, in line with a Reuters poll of analysts, as several observers raised prospects of another contraction in the third quarter, and the industrial sector suggested the government should ditch its balanced budget and kick-start growth via fiscal stimulus. On a calendar-adjusted basis, the annual growth rate in Europe's largest economy slowed to 0.4per cent in the second quarter from 0.9per cent in the first, Wednesday's Federal Statistics Office data showed. For 2019 overall, Berlin expects growth of just 0.5per cent. "The bottom line is that the German economy is teetering on the edge of recession," Andrew Kenningham from Capital Economics said, noting that exporters were facing an even bigger potential hit if a threatened no-deal exit from the EU by Britain materialised on Oct. 31. Many economists define a recession as two consecutive quarterly contractions. Despite Wednesday's headline quarterly figure matching expectations, markets also took fright, with the yield on Germany's benchmark 10-year government bond hitting a record low of -0.624per cent. The global slowdown has impacted growth across western Europe, but Germany's traditionally export-reliant economy has been particularly vulnerable. The statistics office said that net trade slowed economic activity as exports recorded a stronger quarter-on-quarter decrease than imports. Construction was also a drag after the sector pushed up overall growth in the first three months due to an unusually mild winter. "Today's GDP report marks the end of a golden decade for the German economy," Cars ten Brzeski from ING said. "It was a decade of strong growth on the back of earlier structural reforms, fiscal stimulus, localisation at its peak and steroids provided by the ECB in the form of low-interest rates and a relatively weak euro." Domestic safety net? Domestic demand has become an important growth driver for Germany in recent years as consumers benefit from record-high employment, inflation-busting pay hikes and low borrowing costs. Positive contributions came from that source in the second quarter, as household consumption, government expenditure and gross fixed capital formation increased in the quarter, the statistics office said. But analysts suggested the positive impact of those factors was waning. "For a year now, the German economy has been only crawling forward," UniCredit analyst Andreas Rees said, with the many uncertainties facing German exporters presaging more pain in the rest of the year. "Besides Brexit, this is above all the US-Sino trade dispute and possible US tariffs on European cars," Rees said. ING's Brzeski said that, with trade conflicts, global uncertainty and the struggling automotive sector having "finally brought the German economy to its knees," a national debate about fiscal stimulus would get more heated. In a usual move, the powerful BDI industry association joined the growing chorus of voices demanding that the German government ditch its balanced budget rule. "In contrast to the debt brake, which is enshrined in the constitution, the black zero (balanced budget) should be called into question in an economically fragile situation," its managing director Joachim Lang wrote in a guest article in Wednesday's edition of business daily Handelsblatt. His comments came after a government official told Reuters last week that Berlin was considering issuing new debt to finance a costly climate protection package. Chancellor Angela Merkel had on Tuesday poured cold water on domestic and international calls for more fiscal stimulus, saying there was no need 'right now' for such a move. Merkel also pointed to already agreed fiscal steps such as the abolishment of the Soli income tax surcharge for most employees from 2021, a relief worth some 11 billion euros per year that is likely to support domestic demand and with its overall growth.

Shrinking German economy 'on edge of recession' as exports stutter

European stocks fell on Wednesday as <a href="https://www.wionews.com/business-economy/germanys-metro-says-66-billion-bid-undervalues-company-229824">Germany's economy </a>went into reverse, reviving fears of global recession and tempering a rally for equities after Washington delayed tariffs on some Chinese imports.

Europe's biggest economy shrank 0.1 per cent in the second quarter as the trade war and weak demand dragged on German manufacturers.

&nbsp;The eurozone as a whole reported gross domestic product grew just 0.2 per cent in the same quarter.

<a href="https://www.wionews.com/business-economy?page=12">The Euro STOXX 600 fell 0.4 per cent</a>. Markets in London, Frankfurt, and Paris lost from 0.2per cent to 0.6per cent.&nbsp;

Wall Street futures gauges were also lower.

Bond markets were also flashing warning signals of recession.&nbsp;

The gap between US two-year and 10-year Treasury yields, a closely watched metric for signs of a slowdown, fell to less than a basis point after shrinking on Tuesday to its narrowest since June 2007.

The German figures, along with data showing the slowest growth for Chinese industrial output in 17 years stoking recession worries, knocked the wind out the sails for stocks.

Equity investors on Wall Street and Asia had cheered earlier when US&nbsp;President Donald Trump pushed back a Sept. 1 deadline for new tariffs on remaining Chinese imports.

The S&amp;P 500, which had fallen 1per cent on Monday, rose 1.5per cent overnight, sending Asian stocks outside Japan up 0.6per cent.&nbsp;

Benchmarks in Shanghai, Hong Kong and Tokyo all mirrored the surge in US stocks.

But the momentum ebbed in Europe, as optimism faded that Trump's move meant tensions were easing and Germany's slowdown showed the damage already done by the trade war.

"The trade war and the dispute between US and China have already had an impact, especially when you look at countries most sensitive to global trade like Germany and even Italy," said Christophe Barraud, chief economist and strategist at Market Securities in Paris.

The MSCI world equity index, which tracks shares in 47 countries, was flat.

In another sign the trade dispute is dragging on economic growth, China's industrial output slowed more than expected in July.&nbsp;

Its 4.8per cent growth was the lowest in 17 years.

The Japanese yen, considered a safe haven, gained 0.3per cent to 106.42 per dollar as the Chinese data signalled that any resolution to the trade war was a long way off.

Mirroring that view, the offshore Chinese yuan fell 0.4per cent against the dollar to 7.0337, erasing gains made the day before and remaining weaker than the 7 to the dollar it reached last week.

In commodity markets, oil prices fell after the Chinese data from China and a rise in US crude inventories, erasing some of the gains made after Trump's tariff delay.

Brent crude was down 54 cents, or 0.9per cent, at $60.76 a barrel at 0744 GMT, after rising 4.7per cent on Tuesday, its biggest percentage gain since December.

European stocks fell on Wednesday as Germany's economy went into reverse, reviving fears of global recession and tempering a rally for equities after Washington delayed tariffs on some Chinese imports.

European stocks fell on Wednesday as Germany's economy went into reverse, reviving fears of global recession and tempering a rally for equities after Washington delayed tariffs on some Chinese imports. Europe's biggest economy shrank 0.1 per cent in the second quarter as the trade war and weak demand dragged on German manufacturers. The eurozone as a whole reported gross domestic product grew just 0.2 per cent in the same quarter. The Euro STOXX 600 fell 0.4 per cent. Markets in London, Frankfurt, and Paris lost from 0.2per cent to 0.6per cent. Wall Street futures gauges were also lower. Bond markets were also flashing warning signals of recession. The gap between US two-year and 10-year Treasury yields, a closely watched metric for signs of a slowdown, fell to less than a basis point after shrinking on Tuesday to its narrowest since June 2007. The German figures, along with data showing the slowest growth for Chinese industrial output in 17 years stoking recession worries, knocked the wind out the sails for stocks. Equity investors on Wall Street and Asia had cheered earlier when US President Donald Trump pushed back a Sept. 1 deadline for new tariffs on remaining Chinese imports. The S&P 500, which had fallen 1per cent on Monday, rose 1.5per cent overnight, sending Asian stocks outside Japan up 0.6per cent. Benchmarks in Shanghai, Hong Kong and Tokyo all mirrored the surge in US stocks. But the momentum ebbed in Europe, as optimism faded that Trump's move meant tensions were easing and Germany's slowdown showed the damage already done by the trade war. "The trade war and the dispute between US and China have already had an impact, especially when you look at countries most sensitive to global trade like Germany and even Italy," said Christophe Barraud, chief economist and strategist at Market Securities in Paris. The MSCI world equity index, which tracks shares in 47 countries, was flat. In another sign the trade dispute is dragging on economic growth, China's industrial output slowed more than expected in July. Its 4.8per cent growth was the lowest in 17 years. The Japanese yen, considered a safe haven, gained 0.3per cent to 106.42 per dollar as the Chinese data signalled that any resolution to the trade war was a long way off. Mirroring that view, the offshore Chinese yuan fell 0.4per cent against the dollar to 7.0337, erasing gains made the day before and remaining weaker than the 7 to the dollar it reached last week. In commodity markets, oil prices fell after the Chinese data from China and a rise in US crude inventories, erasing some of the gains made after Trump's tariff delay. Brent crude was down 54 cents, or 0.9per cent, at $60.76 a barrel at 0744 GMT, after rising 4.7per cent on Tuesday, its biggest percentage gain since December.

Stocks take fright as recession warnings grow

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