Reliance on cheap Russian energy along with brutal competition from China has hit the German economy hard, and President-elect Trump's threat of tariffs are creating more uncertainty.
FRANCE - For decades after WWII, Germany became the industrial engine of Europe. It remained that way until two years ago. Then, its economy slumped and, after that, went dormant. Once by far the most vibrant of any inside Europe, it peaked in the third quarter of 2022 with an inflation-adjusted output of $954 billion for the three-month period. "You have an economy in Germany that is sick," says Elias Haddad, a senior markets strategist at Brown Brother Harriman in London.
The debt brake is designed to avert structural indebtedness for the country, and now the government has to tighten its financial belt. "We estimate fiscal tightening is 20% of growth a year," Huefner says. "For an economy in the new normal, the German potential growth rates are probably between 0.7 and 0.8% annually." That's relatively low for the country by historical standards.
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