German financial system shrinks in last quarter of 2023

Germany’s gross home product (GDP) fell by 0.3% within the final quarter of 2023, the Federal Statistical Office (Destatis) reported on Tuesday, confirming their earlier estimates.

Facing excessive inflation, excessive rates of interest, a low demand for German exports and a collection of strikes, Europe’s largest financial system noticed its GDP additionally fall 0.3% for all the yr of 2023, in line with the preliminary authorities knowledge.

Germany can be anticipated to face a tough 2024, with economists predicting additional shrinking within the first quarter of this yr.

“The German economy has not grown for almost two years and there is no turnaround in sight,” Sebastian Dullien from the IMK Institute instructed Reuters.

“The weak fourth quarter of 2024 points to a weak start in the new year — the best-case scenario for the first quarter is minimal growth. There is even the risk that the German economy shrinks further,” he added.

Sick man of Europe?

Once thought-about the financial behemoth of the Eurozone, Germany has extra just lately been derided because the “sick man of Europe.”

However, it was not the one poor performer, with France seeing its financial system stagnate. At the identical time, Italy — the EU’s third greatest financial system — noticed its GDP develop by 0.7%, whereas Spain — the EU’s fourth greatest financial system — noticed a whopping 2.5% development.

All these figures have been launched on Tuesday.

German Finance Minister Christian Lindner has tried to color a extra optimistic image, telling the World Economic Forum in Davos earlier in January that “Germany is not the sick man” however reasonably “a tired man” following the latest years of disaster, who was in want of a “good cup of coffee” — which is to say, structural reforms.

Lindner’s personal pro-market Free Democrats (FDP) — probably the most junior associate of the ruling coalition authorities — has refused to budge on holding Germany’s “debt brake” in place.

A uniquely German monetary coverage, the “debt brake” stops the federal government from borrowing more cash in an try to preserve the books balanced. This coverage has been criticized by many economists, particularly outdoors of Germany, who’ve identified that borrowing is critical for investing within the nation’s future, similar to with inexperienced restructuring.

ab/mf (dpa, Reuters)

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