The EU’s largest economy has struggled amid the continuing recession, economists say
Business sentiment in Germany has worsened for the first time since August, with the country likely facing a longer recession contrary to the expectations of analysts, a survey showed this week.
The business expectations index in the EU’s largest economy dropped to 84.3 in December from 85.1 the previous month in a deeper-than-expected decline, according to Munich’s Ifo Institute for Economic Research.
“The economy is weak, and we’ve been waiting for a recovery now for some time, and it’s not coming,” the think tank’s president, Clemens Fuest, told Bloomberg. “This is worrying.”
The country faces the prospect of a recession in the second half of the year as domestic demand and the expectations of exporters have both weakened, undermining hopes for a recovery early next year.
While analysts previously forecast stagnation in Germany, the latest data makes a second consecutive contraction more likely.
The situation has gotten worse, with the recent budget crisis causing more “uncertainty about economic policy going forward,” according to Fuest.
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After the Constitutional Court blocked an attempt to repurpose €60 billion ($65 billion) of funds left over after the Covid-19 pandemic, German Chancellor Olaf Scholz’s government has had to freeze most of its new spending commitments.
“What we would need is a convincing economic policy strategy to get back to growth, a strategy for a recovery. And this strategy is missing completely,” Fuest added.
A separate survey by S&P Global also revealed a deterioration in private sector activity combined with further downturn in business activity in the service sector.
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