Germany is known as the powerhouse of Europe when it comes to industrial development. Also, it is the largest economy in Europe. Companies like BASF, Volkswagen, and Siemens might enter into a recession. This development could have consequences for the United States and the rest of Europe. Recession is generally defined as if there are two successive quarters of adverse growth. Germany has witnessed a 0.1 percent descent in April May June quarter. Sources have commented that with dropping industrial production, it seems that collapse is about to continue in July August September quarter.
Deutsche Bank commented that “we see a recession in Germany and there will be a 0.25 percent descent in this quarter.” Germany is much dependent on export. Political and trade conflict between the United States and China, and also Britain’s uncertainty to leave the European Union are causing effects on the trading of Germany. Also, companies from the automobile industry are facing challenges in adjusting to critical emission standards in China and Europe. In addition to this, companies are facing issues to get aligned with the demand for electric vehicles. Giants like BMW, Volkswagen, and Daimler are facing problems in this situation.
According to Mr. Brezski, if this recession lasts for a longer period, then it will leave its print on the domestic economy. Lower demand the from German market for foreign goods will drag the rest of Europe with it. This will be a boomerang effect on United States as well. It will show that no one is going to win this trade war. Germany is still expecting to show small growth this year where Bundesbank have predicted the 0.6 percent growth and government has predicted 0.5 percent growth. However, the recession is already showing its effect on Europe countries. Under Angela Merkel, Germany’s budget was always in surplus. In recent days it has come under pressure because of IMF and the United States Treasury Department. It caused cutting more taxes and spending more on infrastructure.