Gross domestic product (GDP) for the EU powerhouse has increased in the past three months, much to the surprise of experts, following a grim three quarters that saw Berlin teeter on the knife edge of financial collapse. But Mrs Merkel is not out of the woods yet and trouble may not be far off. Her nation must negotiate US President Donald Trump’s tariff dispute, the seemingly endless Brexit drama and a weaker global economy to avoid a financial crash.
The German government wrote in their report published this week: “The upswing is over, but so far a broad and deep recession is not expected.”
The report goes on to predict significantly less economic growth for the full year 2019 than last year.
Recent forecasts assume 0.5 percent. To put that into perspective, in 2018 German economic output had risen by 1.5 percent.
International trade conflicts and the Brexit drama weigh heavily on export-oriented German industry.
The automotive and mechanical engineering industries a well as the electrical and pharmaceutical sectors have also been extremely hard hit.
Another reason confidence is low for Germany is its plummeting employment figures.
Nuremberg-based market research institute GfK calculated their monthly consumer climate survey for November to be the lowest since autumn 2016.
The news of Germany’s downfall had promoted economists to compare Berlin to the “sick man of not only Europe, but globally as well”.
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If Germany fails to get out of trouble altogether, it would be the first time the country has entered recession in six years.
A German recession could also see the rest of the EU also struggle.
Industrial production has been in decline for a year and a half and exporters have been suffering from the trade war.
Production of capital and intermediate goods have dropped sharply and are now back to levels last seen at the start of 2017.
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In October, the Federal Statistics Office said overall industrial production in Germany had fallen to 0.6 percent compared to August, bringing a drop of 4.3 percent in the space of a year.
Phil Smith from the data group IHS Markit told the paper: “German business expectations have fallen off a cliff since the summer.
He added: “Germany is looking like the sick man of not only Europe, but globally as well.”
Market uncertainty, driven by Brexit, has seen German trade with the UK fall by more than £6.9 billion in the last three years, according to Alexander Borsch, chief economist at Deloitte.
In addition, the country’s prized automotive industry has seen a sharp decline in car production, down nine percent in the first 10 months of 2019.
The German automative supplier Continental warned in September of an “emerging crisis” in the auto industry, and announced it was planning a massive restructuring that would put 20,000 jobs at risk worldwide.
The country’s Council of Economic Experts said: “The longer the weakness in industry persists, the more likely it will spread to the whole economy”.
Despite mass predictions of economic downturn after leaving the EU, Britain’s GDP is predicted to remain stable for this year, 2020 and 2021.
The news follows the EU’s own financial forecasts predicting Britain’s economy is set to grow faster than Germany in the immediate years after Brexit.
With the election date of December 12 drawing ever-closer, polls suggest Prime Minister Boris Johnson will enjoy a victory allowing him to push ahead with his Brexit deal and get the nation out of the bloc by January 31.
Additional reporting by Monika Pallenberg.
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