German Economy Contracts By 0.1 Per Cent In April-June Quarter, Sparks Fears Of Recession In Eurozone 

German Economy Contracts By 0.1 Per Cent In April-June Quarter, Sparks Fears Of Recession In Eurozone German Chancellor Angela Merkel (Sean Gallup/GettyImages)

Fears that the Eurozone is at the brink of a recession have been renewed after the German economy, the largest in the region, shrank by 0.1 per cent in the second quarter of 2019, The Guardian reported.

The new figures mean Germany’s economy grew by an insipid 0.4 per cent over the last 12 months, its slowest rate for six years, turning Europe’s largest economy from being a continental powerhouse  to one of its main laggards. The country registered a similar 0.4 per cent growth in the first three months of the year.

The trade tensions between the United States (US) and China took a toll on the country's export-heavy manufacturing sector leading to renewed calls for an immediate fiscal stimulus.

Destatis, the Federal Statistical Office, reported that Germany experienced “a slight decline in economic performance” in the last quarter, as it was dragged down by a fall in exports. While the consumer expenditure and government spending increased, Destatis noted that the development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports.

Experts attribute a combination of factors to the contraction of the German economy - tumult in Germany’s automobile industry, the fractious trade war between the US and China and increasing likelihood of a no-deal Brexit.

The slowdown in German growth could finally force Angela Merkel to ditch her long-running opposition to government borrowing. The government has been under pressure  to ditch the pledge to run balanced budget (mandated by law) in order to boost faltering growth in the eurozone’s largest economy.