The engine of the European economy is seriously stalling

Germany has been Europe’s economic engine for decades, guiding the region through one crisis after another. However, the stability of the country’s economy is collapsing, and this poses a danger to the entire continent, writes “Bloomberg”.

Europe’s largest economy shrank by 0.3% in the first three months of the year, after a 0.5% drop at the end of 2022, official data showed on Thursday.

“Decades of flawed energy policy, the demise of the internal combustion engine car, and a sluggish transition to new technologies are combining to create the most significant threat to the nation’s prosperity since reunification,” writes Bloomberg.

“We have been naive as a society because everything seems to be fine,” Bloomberg quoted multinational companies as saying.BASF” SE CEO Martin Brudermiller. “These problems that prevail in Germany are accumulating. A period of change is ahead of us. I don’t know if everyone is aware of that.”

Although Berlin has shown a knack for overcoming crises in the past, the question now is whether it can implement a sustainable strategy. The odds look slim. As energy risks have eased, the coalition formed by Chancellor Olaf Scholz has returned to petty infighting over everything from debt and spending to heat pumps and speed limits.

But the warning signs are becoming increasingly difficult to ignore. Despite Scholz telling Bloomberg in January that Germany would be able to overcome Russia’s energy shortages this year without a recession, data released Thursday showed the economy has actually contracted since October and has grown only twice in the past five quarters.

Economists expect Germany’s growth to lag behind the rest of the region in the coming years, and the International Monetary Fund estimates that Germany’s economy will perform the worst among the G-7 countries this year. Still, Scholz sounds optimistic again.

“The prospects for the German economy are very good,” he told reporters in Berlin after the release of the latest economic data.