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Germany’s economy shrank for a second straight year in 2024, underlining the severity of the downturn facing Europe’s manufacturing powerhouse.
The Federal Statistics Office said on Wednesday that Europe’s largest economy contracted by 0.2 per cent last year, after shrinking by 0.3 per cent in 2023. Economists had expected a decline of 0.2 per cent.
Confirmation that Germany is suffering one of the most-protracted economic crises in decades comes six weeks ahead of a crucial snap election. Campaigning so far has been dominated by the spectre of deindustrialisation, crumbling infrastructure and whether or not the country should abandon a debt brake that constrains public spending.
Friedrich Merz, the head of the centre-right Christian Democratic Union who is likely to be Germany’s next chancellor, is campaigning on a reform agenda, promising to cut red tape and taxes and dial back welfare benefits for people who are not working.
The Bundesbank said last month that stagnation was set to continue this year, predicting growth of just 0.1 per cent and warning that a trade war with the US would trigger another year of economic contraction.
Germany is struggling with a crisis in its automotive industry fuelled by Chinese competition and an expensive transition to electric cars, alongside high energy costs and tepid consumer demand.
The country has in effect seen no meaningful economic growth since the start of the pandemic, with industrial production hovering more than 10 per cent below its peak while unemployment has started to rise again after it fell to record lows.
