Germany in crisis as recession edges closer

Signs are indicating that the German economy has entered into recession, with no sign of a recovery in sight until the second half of 2002.

Indications from various sources have all suggested that the country’s economy is contracting in tandem with the US, as the world economy reels from the events of 11 September. “Germany is in recession, there is no doubt about that,” stated Ifo President Hans-Werner Sinn, speaking the day after another industry association, the Bundesverband der Deutschen Industrie (BVB) confirmed that it too considered the predicament as a reality.

While Germany does not yet meet the technical definition of a country in recession, it is clear that it can only be a matter of time before its economy meets the official criteria. While results from the second quarter were flat, it is thought that the forthcoming quarter will show a clear decline, thereby fulfilling the requirement of two successive quarters of negative growth.

With business confidence falling as unemployment increases, it is hard to see how the German economy will recover during a period where the world’s 30 richest economies are contracting as a whole, according to data from the OECD.

However, raising hopes of a possible recovery some time in 2002, the BDI has described the German economy as “standing on solid foundations”, expressing its belief that interest-rate cuts and other stimulus measures would gradually restore confidence in the country’s business climate. (CL)