German economy shrinks for second year in a row - Energy costs and rising competition among the main causes
Germany's economy shrank for the second straight year in 2024, underscoring the severity of the downturn facing Europe's manufacturing powerhouse. The Federal Statistics Office said the continent's largest economy shrank by 0.2 percent last year, after shrinking by 0.3 percent in 2023.
"Germany is experiencing the longest stagnation in its post-war history," economists at the Munich-based Ifo institute said, adding that the country was also performing poorly relative to other countries.
The confirmation that Germany is suffering one of its longest economic crises in decades comes six weeks before snap elections. The campaign has been dominated by the specter of deindustrialization, crumbling infrastructure and the dilemma of curbing debt that is constraining public spending.
While private sector output shrank, government consumption rose sharply by 2.6 percent compared to 2023. The Federal Statistical Office blamed “cyclical and structural pressures” for the weak performance, noting “increased competition for the German export industry, high energy costs, high interest rates and an uncertain economic outlook.”
In the three months to December, output fell by 0.1 percent compared with the third quarter. The Bundesbank said stagnation would continue this year, predicting growth of just 0.1 percent and warning that a trade war with the United States would cause another year of economic contraction.
US President-elect Donald Trump has vowed to impose tariffs of up to 20 percent on all US imports. Germany is struggling with a crisis in its auto industry, driven by Chinese competition and the expensive transition to electric cars, coupled with high energy costs and tepid consumer demand.
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