28th Oct 2016

German economy feels chill of eurozone recession

  • Berlin: German President Joachim Gauck said Germans would be ill-advised to think the worst is over (Photo: Valentina Pop)

Germany's economic growth has slowed to a meagre 0.2 percent, as most other eurozone countries are in recession and austerity measures are taking their toll on German exports to southern countries.

The eurozone's overall economy shrank by 0.1 percent compared to the previous three months, the bloc's statistical office (Eurostat) reported on Thursday (15 November). The 17-nation area had already slipped into recession over the summer, with Greece, Portugal, Spain, Italy, Cyprus and the Netherlands continuing the negative trend.

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France rebounded to 0.2 percent growth compared to stagnation and recession in the previous quarters, and so did Finland and Estonia. The tiny Baltic state boasted a 1.7 percent growth rate, the highest in the eurozone.

Germany's economy meanwhile has slowed from 0.5 percent growth in the first quarter to 0.3 percent in the second and 0.2 in the third, with the country's central bank warning of stagnation and even recession in the months to come.

Speaking at an economics forum in Berlin on Thursday, German finance minister Wolfgang Schaeuble made the case for "sustainable growth" - meaning modest growth rates not based on real estate bubbles or consumer credit.

"We must strive to become a stability union, where fiscal rules are respected" Schaeuble said, one day after massive protests and general strikes took place in Portugal, Italy, Spain, Greece and Belgium against what is seen as a German-led austerity drive.

"I have great respect for the demonstrations in these countries," the German minister said. But he continued to make the case for structural reforms to make an ageing and costly Europe more competitive in relation to China and India.

But the centre-right coalition itself has come under fire from the opposition for allegedly "wasting money on pre-election gifts" and doing the opposite what it is preaching to bailed out countries by passing a controversial subsidy for parents who stay at home to raise their children.

Private indebtedness is meanwhile also going up in Germany, with official figures showing that one in ten Germans is unable to pay their debt - a three-percent increase compared to last year.

Speaking at the same forum, President Joachim Gauck said Germans would be ill-advised to think the worst is over. Despite encouraging growth and employment rates, "we can feel it everywhere, something is deeply wrong," he said.

Changing rules and regulation to stem financial speculation and abuse is a good thing, Gauck said. "But just as urgent is to check our own inner beliefs, our own motives and attitudes. This process seems to be halted," he said.

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