The engine of the European economy has broken down. The coronavirus pandemic will plunge Germany into its worst recession since the Second World War, Economy Minister Peter Altmaier announced on Wednesday April 29. German GDP is expected to drop 6.3% in 2020, while his ministry had forecast growth of 1.1% so far.

This projection, which is based on a "gradual and moderate" lifting of the restrictions in place to limit the spread of the pandemic, forecasts a rebound in 2021, with growth of 5.2% in gross domestic product.

"We are going to experience the worst recession in the history of the German Republic," said Peter Altmaier. "After ten years of growth, the consequences of the pandemic plunge our economy into a recession (and pose) a great economic and political challenge".

Second-quarter GDP collapse forecast of 10%

"The biggest fall comes in the second quarter," added the minister, before an expected "recovery" of activity. German GDP is expected to collapse by 10% in the second quarter, unheard of in recent history, according to joint projections of the main economic institutes, published in early April.

In addition, "the job market finds itself under strong pressure", notes Peter Altmaier. At least three million people were in partial unemployment in March and April ("Kurzarbeit").

If an unemployment rate increase to 5.8% is expected, "it is significantly limited by the use" of this device, where the German state supports two thirds of the wages of the employees concerned, explained the Minister of the 'Economy.

Since last week, Germany has launched a gradual deconfinement, starting with the reopening of certain businesses.

"We must not risk a second increase in infections" and avoid another "uncontrolled spread", warned Peter Altmaier, adding that he is in favor of further relaxation of the restrictions "if the numbers allow it". "It is an endurance race" and "we must not jeopardize the successes" achieved so far.

Impacted exports and aid to businesses

The export industry, pillar of the German economy, is particularly affected by the crisis, which is reaching its outlets and significantly slowing international trade. 

The government expects exports to fall by 11.6% in 2020 before recovering to + 7.6% in 2021. Imports must fall by 8.2% in 2020 before increasing by 6 .5% next year. In both cases, the 2019 level will therefore not be found before 2022 at least.

To cope with the crisis, the German Parliament already adopted at the end of March a plan of nearly 1.1 trillion euros, including public guarantee schemes for loans and direct aid to businesses, especially for SMEs.

Several large companies have also already benefited from this support via guaranteed loans, including the tour operator TUI and the equipment supplier Adidas, while the company Lufthansa is negotiating aid of several billion euros which could see the State go up to the capital of the group .

With AFP and Reuters

The France 24 week summary invites you to come back to the news that marked the week

I subscribe

Take international news everywhere with you! Download the France 24 app

google-play-badge_FR