Euro Area

Economy 27-03-2024

German economy to nearly flatline this year, Kiel, ifo Institutes say

Est. 3min

Frankfurt, Germany, March 27, 2024 (AFP) - The German economy is expected to barely grow this year, leading economic institutes said Wednesday, as weak demand at home and abroad slows the path to recovery.

Europe's largest economy will expand by just 0.1 percent in 2024, five think-tanks said in a joint statement, a sharp downgrade from their earlier forecast of 1.3 percent growth.

"Cyclical and structural factors are overlapping in the sluggish overall economic development," said Stefan Kooths from the Kiel Institute for the World Economy (IfW Kiel).

"Although a recovery is likely to set in from the spring, the overall momentum will not be too strong," he added.

The German economy shrank by 0.3 percent last year, battered by inflation, high interest rates and cooling exports, and is struggling to emerge from the doldrums.

Even though inflation has steadily dropped in recent months, consumer spending was picking up "later and less dynamically" than previously forecast as wages lag behind, the institutes (DIW, Ifo, IfW Kiel, IWH and RWI) said.

And Germany's export sector, usually a key driver of economic growth, was suffering from cooling foreign trade against a fragile global economic backdrop.

Energy-intensive businesses in particular have been hit hard by soaring energy prices following Russia's war in Ukraine, contributing to a manufacturing slump in Europe's industrial powerhouse.

Corporate investments meanwhile have been dampened not just by the European Central Bank's interest rate rises, which have made borrowing more expensive, but also by "uncertainty about economic policy", the institutes said.

- Debt brake debate -

The criticism of Berlin comes after a shock legal ruling late last year threw Chancellor Olaf Scholz's budget into disarray, forcing the government to rethink its spending plans.

The government recently also drastically downgraded its own economic forecasts, expecting output to expand by just 0.2 percent this year.

Economy Minister Robert Habeck last month acknowledged the economy was "in rough waters" and in need of a "reform booster".

But Scholz's three-way coalition government -- made up of the Social Democrats, the Greens and the liberal FDP -- is divided over how to turn the tide.

Calls have grown for the government to relax its constitutionally enshrined "debt brake", a self-imposed cap on annual borrowing, in order to turbocharge much-needed spending on infrastructure modernisation and the green transition.

Habeck is in favour of relaxing the debt rules, but Finance Minister Christian Lindner from the FDP is deeply opposed.

The think-tanks said they recommended "a mild reform" of the debt brake to allow "for more debt-financed investments than before".

Looking ahead, the institutes expect the recovery to quicken next year as inflation eases further and demand picks up.

They now expect the economy to grow by 1.4 percent in 2025, only slightly below their previous forecast of 1.5 percent.

Economy 07-03-2024

ECB slashes inflation forecast but holds rates amid mounting analyst worries

Est. 6min

The ECB on Thursday (7 March) held interest rates at their current record high levels, despite also slashing its growth and inflation projections for the eurozone, with ECB president Christine Lagarde claiming the bank is not “sufficiently confident” on wage and profit data to begin cutting rates.

Economy 19-02-2024

France announces €10bn cut in public spending as growth outlook darkens

Est. 3min

French Finance Minister Bruno Le Maire said the government had lowered its forecast for 2024 GDP growth to 1% from 1.4% as war in Ukraine and Gaza and a slowdown at top trading partners Germany and China darkened the outlook.

Economy 18-01-2024

‘A tribal clique’: Lagarde denounces economists at Davos

Est. 5min

European Central Bank President Christine Lagarde launched a stinging attack on the economics profession on Wednesday (17 January), accusing analysts of having “blind faith” in their models, which often bear little connection to reality.

Electricity 12-01-2024

Electricity pricing is Europe’s hidden industrial policy

Est. 6min

The subsidy race triggered by the energy crisis in 2022 showed how electricity policy is central to industrial policy. Addressing this at EU level will become even more important in the coming years as Europe moves to electrify transport and other sectors, argue Ben McWilliams, Giovanni Sgaravatti, Simone Tagliapietra, and Georg Zachmann.

Economy 12-01-2024

ECB interest rates at peak: Lagarde

Est. 2min

European Central Bank President Christine Lagarde said Thursday (11 January) that interest rates in the eurozone had reached their peak after rising rapidly in response to high inflation last year.

Economy 21-12-2023

Explainer: The complex fiscal rules that EU finance ministers just agreed to

Est. 6min

After months of negotiations, the finance ministers of EU countries on Wednesday (20 December) agreed on a new set of rules to govern member state finances.

Economy 08-12-2023

Calviño picked to lead European Investment Bank, in boost for Spain

Est. 3min

EU finance ministers on Friday (8 December) picked Spanish Deputy Prime Minister Nadia Calviño to become the next head of the European Investment Bank in a boost for Spain's clout within the bloc.

Economy 17-11-2023

German government’s court setback unlikely to impact EU fiscal rule reform

Est. 2min

A German court ruling that forced Berlin to freeze €60 billion in planned green investment spending is unlikely to have much impact on the reform of EU fiscal rules now under review, senior euro zone officials said on Thursday (16 …

Economy 09-11-2023

Divided EU finance ministers to discuss fiscal rules as deadline nears

Est. 7min

As EU finance ministers prepare to discuss once again the reform of the EU’s rules for national debts and deficits, the positions of hawkish countries and those calling for more flexibility remain wide apart, with little sign that a compromise is within reach.

Economy 20-10-2023

The climate-hostile paradigm

Est. 11min

The EU's reaction to the current inflationary episode shows that it still follows a macroeconomic paradigm that makes it unable to properly react to the climate crisis and will ultimately lead to economic and ecological misery.

Economy 04-10-2023

Former prime ministers, officials call for “gradual” EU federalism

Est. 5min

32 former high-level politicians and EU officials published a manifesto, calling for a central fiscal capacity for the EU, a shift to a new EU business model as well as institutional reforms.

Economy 29-09-2023

ECB’s Lagarde calls for EU-issued green bonds

Est. 5min

The European Central Bank (ECB), the European Investment Bank (EIB), and the International Energy Agency (IEA) have called for a faster transition towards clean energy, with ECB President Christine Lagarde arguing for a "green Capital Markets Union" and EU-issued green bonds.

Economy 22-09-2023

The social dimension of the EU’s economic governance review

Est. 5min

The EU needs to take the opportunity to strengthen the social dimension of its economic governance regime, argue Estrella Durá Ferrandis and Alba Huertas Ruiz.

Economy 18-09-2023

EU ministers agree on fiscal reform ‘camino’, aim for year-end deal

Est. 3min

European Union finance ministers on Saturday (16 September) backed a timeline calling for the reform of the bloc's fiscal rules by the end of the year as they look to balance debt cuts with investing in an individually tailored yet equal way.

Economy 15-09-2023

ECB hikes key rate to record high, defying calls for pause

Est. 4min

The European Central Bank hiked a key interest rate to a record high Thursday (14 September) as it battles soaring inflation, defying calls for a pause to take pressure off the faltering eurozone economy.

Economy 07-09-2023

EU Parliament risks missing the point on Digital Euro

Est. 9min

Welcome to EURACTIV’s weekly Economy Brief. You can subscribe to the newsletter here. With next year's European elections closing in and conspiracy theories about the Digital Euro flying through the ether, the European Parliament is taking an overly …

Economy 07-09-2023

Digital Euro as currently planned is ‘bound to fail’, warns economist

Est. 5min

Economy professor Dirk Niepelt warns that too many financial stability safeguards might mean that the digital cannot fulfill its role as an attractive public alternative to private payment providers.

Economy 07-09-2023

Italy’s recovery funds saga a test for EU fiscal integration

Est. 5min

The ongoing revision of Italy’s recovery plan, which triggered a confrontation with municipalities, carries deep implications for the country’s internal politics, its economy and the EU approach to fiscal integration, making a failure of the plan a no-go for Brussels.

Economy 05-09-2023

European Parliament sceptical of Digital Euro

Est. 5min

The Economic Affairs Committee of the European Parliament voiced concerns over the digital euro, including costs for banks and its use by EU citizens, during questions posed to European Central Bank Executive Fabio Panetta on Monday (4 September).

Economy 04-09-2023

EU’s Gentiloni confident over budget rule deal by year-end deadline

Est. 3min

European Union Commissioner for Economy Paolo Gentiloni said on Saturday (2 September) he was confident an agreement over re-implementing EU budget rules would be reached by year-end, ruling out an extension of their suspension into 2024.

Economy 01-09-2023

Climate crisis calls for U-turn in EU’s economic governance

Est. 7min

It is now clear that extreme weather events will have a massive impact on our economies if we don’t transform them. Times have changed and the rules governing the coordination of national economic policies in the EU must adapt, argues Isabelle Brachet.

Economy 31-08-2023

ECB-Panetta: Capital Markets Union might require EU fiscal capacity

Est. 4min

The outgoing member of the executive board of the European Central Bank (ECB) Fabio Panetta argued that a genuine Capital Markets Union (CMU) might require the EU to have a standing fiscal capacity with a borrowing function.

Economy 31-07-2023

Eurozone inflation falls further in comforting sign for European Central Bank

Est. 3min

Eurozone inflation fell further in July and most measures of underlying price growth also eased, in a largely comforting sign for the European Central Bank (ECB) as it considers ending its severe run of interest rate hikes.