German economy is doing 'dramatically bad', says economics minister as government prepares to cut GDP forecast – Euractiv

The German economy is doing “dramatically bad,” said Economics Minister Robert Habeck (Greens) on Wednesday (February 14) at a trade fair in Leipzig. For 2024, the federal government only expects growth of 0.2 percent.

Last year, Germany posted the worst performance of any major economy in the world, with a GDP decline of 0.3%, adding to concerns about the deteriorating situation in Europe's largest economy.

While politicians and business leaders had hoped for a more positive outlook for 2024 – the federal government until recently forecast a growth rate of 1.3% for this year – Habeck's comments, reported by the FAZ earlier on Wednesday, point to a much bleaker future there scenario.

The government is now prepared to lower its forecast to 0.2%, said Habeck – thereby expressing a “dramatically bad” situation.

The revision of growth estimates for Europe's industrial and export engine casts a gloomy shadow over the European Commission's economic forecast for the entire union, due on Thursday (February 15), as tDue to the close trade relations that most European countries maintain with the industrial power, the EU's overall economy traditionally tends to follow Germany's development.

The economic collapse in Germany was recently interpreted more structural than temporary by several experts as the country struggles with higher energy prices and higher corporate taxes than global rivals, while companies complain of increasing regulatory and bureaucratic burdens.

Although the country's public debt is significantly lower than other G7 economies, the government is divided on whether higher public debt is needed to escape the current recession.

Habeck recently floated the idea of ​​a new debt-financed fund worth 30 billion euros annually for industrial subsidies in the form of tax credits – similar to the US Inflation Reduction Act (IRA). However, Finance Minister Christian Lindner (FDP/Renew) has spoken out in favor of a more comprehensive cut in corporate taxes, which should be financed through spending cuts.

[Edited by Anna Brunetti, Nathalie Weatherald]

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