German businesses see more recession
• Chamber warns of worst downturn in 20 years as ‘ bad mood’ sets in
Germany ’ s DIHK chambers of industry and commerce on Thursday warned that Europe’s biggest economy would shrink by 0.5% in 2024, in a second year of recession and its worst downturn in two decades.
A DIHK poll of more than 27,000 companies showed that of those surveyed, 35% expected business to deteriorate in the next 12 months with only 14% expecting an improvement, as high energy prices, bureaucracy, a skilled workers shortage and weak domestic demand weigh on economic output.
“The bad mood among companies is becoming more entrenched,” said the DIHK in Berlin on Thursday, adding that it would be only the second time in Germany’s post-war history that the economy contracted for two years in row.
The first case was in 2002 and 2003, when two consecutive recessions pushed the Social Democrats-Greens government of the time to introduce aggressive labour market and welfare reforms that were credited with elevating Germany to an internationally envied level of competitiveness.
“This is a clear alarm signal that Germany and Europe must take seriously,” DIHK head Martin Wansleben said.
The European Commission on Thursday said Germany would be the biggest drag on eurozone growth in 2024/25, with expansion of only 0.3% in 2024 rather than the 0.8% that had been predicted in November and 1.2% in 2025, after a 0.3% recession in 2023.
The government next week will publish its economic growth forecast for 2024. A source with knowledge of the matter said Berlin would slash its growth forecast to just 0.2%, although still a much more optimistic forecast than the DIHK’s.
Finance minister Christian Lindner said on Wednesday that growth projections were “embarrassing and dangerous from a social perspective”, as Germans ’ dissatisfaction with their economic situation had prompted a series of strikes across the country.
“If we do nothing, our country will fall behind ... Then Germany will become poorer,” he said at an event in Potsdam.
Berlin would cut its growth forecast for 2025 to 1% from a previously expected 1.5%, a government source told Reuters.
Nearly three out of five companies saw Germany’s economic policies as a business risk, the survey showed, adding that 33% of firms planned to reduce investments there in the next 12 months, while 24% said they planned expansion.
The ruling coalition of Chancellor Olaf Scholz wants to present proposals to strengthen Germany as a business location by spring. Analysts said this could include tax reform and cutting bureaucracy.
Wansleben said legislation that obliged German companies to scrutinise human rights and environmental issues in supply chains globally must be suspended as it placed an onerous burden on larger companies.
A sharp rise in interest rates to fight inflation in the wake of Russia’swar in Ukraine had also slowed the economy, he said. /