News

Germany and the Prospects of a Recession

Germany's economy is sputtering.

Now, the word "recession" infuses discussions about the eurozone's largest economy.

Here's an excerpt from an Oct. 31 BBC article:

The eurozone has a problem. Its biggest economy, Germany, is in or close to recession.

That has further stimulated a debate about whether Berlin should open the financial taps and spend more.

Should Germany launch a programme of spending on, for example, its infrastructure?

Should the government ditch the policy of balancing the budget, known as "the black zero" and the related legal restriction on borrowing called the "debt brake"?

We had some clues about the impact of Germany's downturn with eurozone economic growth figures that showed growth of 0.2% in the third quarter of the year. That is sluggish though slightly better than many economists were expecting. We will have to wait two weeks for a read-out on Germany's own performance in the same period.

The eurozone as a whole might not be in recession, but inevitably the downturn in Germany affects the country's neighbours.

The question is what should policymakers - especially the German government and the European Central Bank (ECB) - do about the situation.

The ECB has already taken steps. It has cut its interest rates to ultra-low levels (to below zero for one of its key rates) and it is about to re-start the policy known as quantitative easing, buying financial assets with newly-created money.

But there are real doubts about how effective these measures will be. Many economists believe that monetary policy - what central banks do - has done about as much as it can in the eurozone.

Elliott Wave International's Global Market Perspective has been providing updates on Germany's economic woes.

Here's a chart that the publication showed in August, along with the commentary:

freefalling-full

German factory orders fell another 2.2% in June, sending the year-over-year change to (negative) -8.6%.

Prepare now for what EWI's global analysts see ahead.

Read the free report, "What You Need to Know Now About Protecting Yourself from Deflation."

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