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Germany's economy contracted for the second year in a row in 2024, underscoring the severity of the recession facing Europe's manufacturing industry.
The Federal Statistics Office said on Wednesday that Europe's largest economy contracted by 0.2 percent last year, after contracting by 0.3 percent in 2023.
“Germany is facing the longest recession in its post-war history so far,” said Timo Wollmershäuser, an economist at Ifo, a Munich-based economic think tank, adding that the country was also doing very poorly in international comparisons.
Confirmation that Germany suffering one of the longest economic crises in decades comes six weeks before a crucial snap election.
The campaign is dominated by the idea of the collapse of businesses, the collapse of infrastructure and whether or not the country should end the debt bankruptcy that forces government spending.
Friedrich Merz, the head of the centre-right Christian Democratic Union who is likely to become Germany's next chancellor, is campaigning on a reform agenda, promising to cut red tape and taxes and cut welfare benefits for the unemployed.
While private sector output contracted, government consumption increased significantly by 2.6 percent compared to 2023.
Ruth Brand, president of the Federal Statistics Office, blamed “cyclical and structural pressures” for the poor performance, pointing to “increasing competition in the German export industry, high energy costs, persistently high interest rates and an uncertain economic outlook.” ”
In the three months to December, output fell by 0.1 percent compared to the third quarter.
Robin Winkler, chief economist for Germany at Deutsche Bank, said the contraction in the fourth quarter came as a “surprise” and “concerning”.
“If this is confirmed, the economy will have lost more strength by the end of the year,” he said, pointing out that this is likely to be driven by “political uncertainty in Berlin and Washington”.
The Bundesbank said last month that the suspension will continue this year, predicting growth of 0.1 percent and warning that the trade war with the US will cause another year of economic growth.
US President-elect Donald Trump has promised to impose tariffs of up to 20 percent on all US exports.
Germany is grappling with a crisis in its auto industry fueled by Chinese competition and a costly switch to electric cars, alongside higher energy costs and higher consumer demand.
Manufacturing output contracted by 3 percent, the statistics office said on Wednesday, while corporate investment fell by 2.8 percent.
Germany has not seen meaningful economic growth since the pandemic began, with industrial production running more than 10 percent below its peak while unemployment has begun to rise again after falling to a record low.