Germany's economy not in a great shape, recovery on shaky grounds

By Al Mayadeen English
Source: Agencies
14 Aug 2023 23:20

The German economy ministry says that a number of market indicators suggest that a steady economic recovery is unlikely in the coming few months.

Germany flag in front of a board showing stocks of German companies on the country's Borse exchange

A sustained recovery of the German economy is unlikely to happen in the near months, new data released last week suggested, the economy ministry said on Monday according to Reuters.

"On the domestic front, the expected cautious recovery in private consumption, services and investment is showing the first signs of hope, which are likely to strengthen as the year progresses," said the ministry in its monthly report.

"At the same time, the still weak external demand, the continuing geopolitical uncertainties, the still high rates of price increases and the increasingly noticeable effects of monetary tightening are dampening a stronger economic recovery."

The ministry has released earlier a pessimistic outlook for the economy attributing the slump to surging energy prices and elevated interest rates that have adversely impacted various sectors of industry.

Sanctions that were supposed to be a deadly blow to Russia's economy have turned into a nightmare for Germany, Europe's largest economy.

In June, the Eurozone officially announced it had entered recession. Among the main factors for this financial crisis was the downturn of the bloc's biggest economies, on top of which was Germany.

Germany is on a steady path of economic downfall and de-industrialization as a result of Europe's anti-Russia policies and sanctions, German MP Uwe Schulz, a member of the AfD party warned last week.

According to the politician, Europe's anti-Russian hysteric sanctions, unprecedented in history in terms of volume and period span in which they were adopted, did not subdue Moscow, rather, they shoved the German industrial complex downhill, leaving one of the EU's most powerful countries vulnerable to rising energy prices and sticky inflation rates.

Russia was ranked in the top five world's largest economies as of the end of 2022 as per a recent World Economics report, and it outgrew all of its European peers in terms of purchasing power parity (PPP).

The report showed that Russia surpassed Germany's $5 trillion economy when factoring based on the PPP metric.

It was “not surprising that in 2022 the Russian Federation displaced Germany from fifth place in the ranking of the world's leading economies," he added.

Schulz pointed out that evidence of the extreme impact of sanctioning Russia on the German economy is the “disappointing economic prospects [for the country] for 2023,” as well as “poor results in the automotive industry, [which] continue to lead to lower manufacturing output.” In this regard, the lawmaker called on the German government to immediately “lift economic sanctions against Russia” in order to “prevent [further] economic damage.”

'Sick man of Europe'

"Germany's economic situation is darkening," Clemens Fuest, the president of the ifo Institute, the Leibniz Institute for Economic Research at the University of Munich, said earlier this month.

Germany's GDP is set to fall again during the current quarter, the research institute concluded.

Further offering dreadful forecasts on the German economy, Stefan Wolf, the head of the Federation of German Employers' Associations in the Metal and Electrical Engineering Industries (Gesamtmetall), said earlier this week that Germany's products are no longer competitive in the market.

It has become the “sick man of Europe," he added.

The phrase “sick man of Europe" was used by the press in the late 1990s to describe the dire state of the German economy, which was dwindling in heavy debt and was facing high expenses to rebuild its fragile production industry.

Wolf said that a recession is looming in the country in the second half of the year.