Germany, Europe’s largest economy, is still on track for a recession, according to experts, despite a new government proposal to spend 65 billion euros ($64.49 billion) to protect energy users and companies from rising inflation.
The latest tranche puts the total sum allotted to inflation-fighting since the Ukraine crisis began in February to 95 billion euros. “The third relief package does little to change the reality that Germany is likely to enter recession in the autumn,” Commerzbank chief economist Joerg Kraemer said. Carsten Brzeski, the chief economist at ING, agreed: “The package would most likely fall short of stopping the broader economy from entering a recession.” “The German economy grew by the thinnest of margins in the second quarter, and the Ukraine war, soaring energy prices, the pandemic, and supply disruptions are now pushing it into a downturn, which it may already be in.”
According to a poll released on Monday, Germany’s services sector dropped for the second month in a row in August, as rising prices and waning confidence weighed on domestic demand. “The aid package will not change the fact that Germany has gotten poorer as a net energy importer,” Kraemer added. According to the trade union-affiliated Macroeconomic Policy Institute (IMK), the current government assistance measures will avert a sharp drop in consumer demand in the coming months.