Quarter after quarter, there are no signs of economic recovery across the Rhine. And the new political crisis that Olaf Scholz’s government has just gone through regarding the budget is not likely to improve the situation. The economic institutes, which released their projections on Wednesday December 13 and Thursday December 14, have all lowered their growth forecasts, which should have consequences for the whole of Europe.
They expect an increase in economic activity of between 0.6% and 0.9% for 2024, a level well below that expected in the summer, when experts anticipated an increase of 1.2%. at 1.4%. “The German economy is having great difficulty emerging from its slowdown phase”, summarized the DIW Institute in Berlin on Thursday. Small consolation: the recession will be less than expected in 2023, with a contraction of 0.3%, instead of 0.5% forecast so far.
The German economy, which was already struggling with the consequences of the energy crisis linked to the war in Ukraine, now finds itself burdened by uncertainties in economic policy, which affect both government action and the confidence of economic players. .
“Wait and see when it comes to investing”
Following the ruling of the Constitutional Court of Karlsruhe on November 15, which declared illegal the transfer of a budgetary balance of 60 billion euros to an investment fund “for transformation and climate”, excluding budget, the government has in fact announced a large savings program. This includes reductions in subsidies and an increase in the carbon tax, in order to be able to complete the 2024 finance law.
These measures should have clear effects on the economy, experts anticipate. Not only will several billion euros of public spending planned for 2024 not be injected into the economy, but gray areas remain on the exact scale of the reductions to come in the following years. “These uncertainties delay the recovery, because they increase the tendency of consumers to save. And businesses and households are postponing their investment decisions,” explained Timo Wollmershäuser, head of the economic department at Ifo, Thursday morning in Berlin.
The Kiel Institute also points out that “Risks have significantly increased.” “The outlook for the coming years has darkened due to ongoing budgetary consolidation. The wait-and-see approach to investment continues,” underlines economist Stefan Kooths, for whom growth would have been 1.4% without the judgment of the Karlsruhe Court.
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