ASSESSMENTS

Money Alone Won't Solve Germany's Economic Problems

Sep 13, 2019 | 10:30 GMT

German Chancellor Angela Merkel in the Bundestag during a budget debate on Sept. 10, 2019, in Berlin.

German Chancellor Angela Merkel (CDU), listens during the first session after summer Vacation of the German Parliament, or Bundestag, which debates the Federal Budget on September 10, 2019 in Berlin, Germany. (Michele Tantussi/Getty Images)

(Michele Tantussi/Getty Images)

Highlights

Germany's slowing economy will force its government to introduce tax cuts and spending hikes to generate growth.
But in doing so, Berlin will likely take a more cautious approach by gradually rolling out measures one at a time, instead of a potentially contentious stimulus package that could increase tensions in the country's governing coalition.
Meanwhile, trade disputes between the United States and China, along with Brexit-related uncertainty and looming U.S. tariffs on EU auto exports, will continue to generate headwinds for the German economy.

Europe's largest economy seems headed for its first recession in a decade. Recent data suggests that the German economy could contract again in the third quarter of 2019, after already contracting by 0.1 percent in the second quarter. According to the Munich-based Ifo institute, business sentiment in the country also reached a nearly seven-year low in August. And likewise, IHS Markit found that sentiment among Germany's manufacturing and service sectors, in particular, fell to its lowest level since 2013....

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