The German economy shrank by 0.3% in the second quarter of the year compared to the previous quarter. The main reason for this contraction was a drop in export demand following purchases made before the US tariffs.
The country is the only G7 economy that has not grown for the past two years.
Analysts say that due to ongoing trade tensions, Germany could enter a recession for the first time in three consecutive years since the post-war period. The German government announced an investment stimulus package, additional defense and infrastructure spending, and a corporate tax cut to revive the economy. However, the Ministry of Economy stated that “These measures are not enough; more is needed for competitiveness.” Industrial production and investments performed worse than expected, while exports and household spending remained limited. Government spending increased by 0.8%.Experts expect a gradual recovery in the economy with the ECB’s interest rate cuts and looser fiscal policy. However, this recovery is predicted to be limited due to structural problems and high US tariffs.
