The EU’s largest economy has struggled amid the continuing recession, economists say
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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.
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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