Published On: Wed, Sep 4th, 2019

Germany crisis: Brexit uncertainty sparks recession panic as export-heavy economy falters | World | News

Exports to Britain dropped by 21 per in the three months to June – the biggest fall since the 2009 financial crisis – as the German economy shrank by 0.1 per cent over the same period. The country’s economy has long been seen as the powerhouse of the European Union but a combination of factors – including Britain’s imminent departure from the EU – is taking its toll.

Brussels has warned the political chaos in London has increased the risk of a no deal Brexit.

In a message to business and other organisations to step up preparations for a no deal scenario on October 31, the European Commission said it remained a “possible, although undesirable, outcome”.

Andrew Kenningham, economist at Capital Economics, said: “Along with the threat of US tariffs on German autos, Brexit is a significant downside risk against an already very weak backdrop.”

BSI Economics analyst Hadrien Camatte said: “German growth is hurt by the slowing of global demand and Brexit.”

Exports account for 47 per cent of gross domestic product in Germany, compared with only 30 per cent of the British and French economies and 12 per cent in the US.

Last year the country sold £75bn of goods to the UK – its fifth-largest export market behind the US, France, China and the Netherlands.

READ MORE:Figures rebound to show economy growing scotching recession gloom

Holger Schmieding, chief economist at Berenberg in London, said: “German exports to the UK are already 12 per cent lower than they would have been if the trend that prevailed before the June 2016 Brexit vote had continued.”

The fall of the pound, which has slumped 14 percent since the 2016 EU referendum, has done little to help Germany’s export-dependent economy.

Klaus Winkler, boss of a German crankshaft machine manufacturer, described Brexit as “a pain in the neck”.

Germany is also battling flagging business confidence which fell more than expected last month.

Munich-based Ifo institute said business confidence index based on a survey of 9,000 firms sank to 94.3 points from 95.7 points in July.

A deterioration was seen both in managers’ views of the current situation and in their predictions for the next six months.

The closely-watched Ifo index is seen widely as a reliable indicator for future growth in the German economy.

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