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Germany could crash into recession after a decline in exports dampened the nation’s economy, which shrunk by 0.1 percent in this year’s second quarter. When Germany’s statistics were revealed on Wednesday, shock waves rippled through stock markets in Europe and the rest of the world. And as Germany has the Eurozone’s biggest economy, how could the crisis affect the European Union?
Although it’s hard to predict exactly how the EU will be affected by Germany’s economic crisis, there is little chance the bloc will thrive when it’s largest member state is struggling.
Germany accounts for more than a quarter of the EU’s output, with its 83 million people.
The European nation is counted by many of the bloc’s countries as their No 1 trading partner.
This include France, Italy, the Netherlands, Belgium, Slovakia and Sweden.
Suppliers throughout Europe earn much of their revenue by selling to big German manufacturers like Daimler, Siemens and ThyssenKrupp.
Katharina Utermöhl, senior economist at the German insurer Allianz told New York Times: “If the largest member state is affected this will also start to weigh on the euro area as a whole because of the close economic relations.”
Should the EU sustain more economic blows, such as a no deal Brexit or a meltdown in Italy, “the risk of a recession is rather high”, according to Ms Utermöhl.
Other economists are even more pessimistic, with Carl Weinberg, the chief international economist at High Frequency Economics saying: “Euroland is headed for a recession.”
He told New York Times that “all the writing is on the wall,” citing numerous indicators of trouble: less production at eurozone factories, surveys showing increasing gloominess among business managers and a contraction in global trade.
NatAlliance global fixed income head Andy Brenner told FOX Business’ Liz Claman on Friday Germany is in “terrible shape”.
He said: “Germany is in terrible shape with negative GDP this week and with their expectations looking for another negative GDP in the third quarter, the Germans are going to be forced to open up their pockets and do fiscal stimulus. In Europe, its crisis mode.”
Germany is especially vulnerable to trade tensions because exports account for almost half of the country’s gross domestic product.
And as Germany battles its downfall, the EU is already struggling with a host of other issues.
According to the EU’s official statistics agency, Eurozone exports fell five percent in June.
And the EU is already battling the potential outcome of a no deal Brexit, which could see the UK leave the bloc without a deal in place on October 31.
In Italy, an unstable government and one of the highest debt burdens in the world, could increase the chances of a Europe-wide financial crisis.
Germany could crash into recession after a decline in exports dampened the nation’s economy, which shrunk by 0.1 percent in this year’s second quarter. When Germany’s statistics were revealed on Wednesday, shock waves rippled through stock markets in Europe and the rest of the world.
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