Economic crisis in Germany: Is a third recession in a row looming?
Frankfurt/Main. Minimal growth at the beginning of the year, but a bleak outlook: The German economy grew by 0.2 percent quarter-on-quarter in the first three months, according to preliminary data from the Federal Statistical Office. Both private consumption expenditures and investment increased.
However, the third consecutive recession is looming for the year as a whole, not least because US President Donald Trump's aggressive tariff policy has clouded the global economic outlook. In the final quarter of 2024, the German economy shrank by 0.2 percent.
The weak economy is having an impact on the labor market. Although the number of unemployed in Germany fell by 36,000 compared to the previous month to 2.932 million in April thanks to a slight spring recovery, this is still 182,000 more than a year ago, according to the Federal Employment Agency in Nuremberg.
US President Donald Trump has thrown trading partners and financial markets into turmoil with his XXL tariff package, and his zigzag course is causing additional uncertainty – this is poison for the global economy.
Since Donald Trump's inauguration, tremors have been felt around the world like only in major crises. Hardly any indicator is following its usual course. A constantly updated overview of the measurable effects of US policy.
As an export nation, Germany is particularly affected by Trump's tariff offensive: The United States is Germany's most important trading partner, ahead of China and the Netherlands, and the largest buyer of German exports. In 2024, a good ten percent of all German exports – goods with a total value of just over 161 billion euros – went to the United States.
Instead of the longed-for upturn after two years of stagnation, Europe's largest economy is facing a third consecutive year of no growth – something unprecedented in the history of the Federal Republic. In recent weeks, the already low expectations have been lowered in a series of steps.
The acting German government expects gross domestic product (GDP) to stagnate this year. In January, it had forecast an increase of 0.3 percent. The International Monetary Fund (IMF) also does not expect the German economy to grow this year. The IMF anticipates a global slowdown due to Trump's aggressive tariff policy.
Following the change of government in Berlin, the CDU/CSU and SPD have committed to quickly implementing a number of measures to stimulate the domestic economy: lower energy costs and corporate taxes, more flexible labor laws, and less bureaucracy. CDU politician and energy manager Katherina Reiche is set to succeed Robert Habeck (Greens) and lead the German economy out of the crisis.
The domestic economy is likely to be boosted by the federal government's massive billion-euro package for defense and infrastructure – albeit not immediately. The IMF expects the multi-billion euro financial package to have a positive impact on the German economy starting in 2026. Economists estimate that this could then bring an end to the economic downturn in Germany: They expect the German economy to grow between one and one and a half percent in 2026.
RND/dpa
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