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The German economy has been showing signs of a slowdown. Could it be that Europe’s biggest economy leads the continent into a recession? Nina Adam and Bertrand Benoit write in The Wall Street Journal:
German manufacturers saw orders drop sharply in February, increasing the likelihood that Europe’s flagship economy could contract in the first half of 2019 in a setback for a weakened continent.
Total orders for the sector dropped 4.2% from January, Germany’s statistics office said Thursday, missing forecasts by a large margin. Compared with February 2018, order volumes were down a steep 8.4%.
“It’s devastating,” said VP Bank economist Thomas Gitzel.
The steep slowdown in Germany is bad news for the rest of Europe. With Italy already in recession and the French economy hit by protests against President Emmanuel Macron’s reform agenda, the eurozone economy will find it hard to expand in the coming months.
A slump would hit the continent as both its governments, with their high public debts, and the European Central Bank, after years of ultraloose monetary policy, are reaching the limits of how they can support the economy.
While Germany, which has a budget surplus and low borrowing costs, could theoretically spend itself and the region out of a slump, Berlin’s iron domestic commitment to a balanced budget makes this unlikely.
A return of economic hardship could be a boon for the populist insurgency that first flared up with the continent’s refugee crisis of 2015 and continues to simmer across the region.
Read more here.