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Shockwaves as Germany goes into recession
Hugo Duncan13.11.08
The global economy took a new battering today as Germany became the first major nation to officially enter recession.
Gross domestic product in Europe's largest economy fell 0.5% in the third quarter, having dropped 0.4% in the previous three months.
While Germany was the first Group of Seven nation to officially enter recession, defined as two consecutive quarters of economic decline, other countries including Britain, the United States, France, Japan and Italy are expected to follow suit.
The Organisation for Economic Co-operation and Development today cut its forecast for global growth next year for the second time this year.
It said the economy of its 30 members will contract 0.3% in 2009 after expanding 1.4% this year.
"The OECD as a whole is currently in recession," said its director of policy studies Jorgen Elmeskov in Paris.
The German slump is the deepest since 1996 and economists said it could get worse.
"If you think today's numbers are already bad, just wait for the next quarter," said ING economist Carsten Brezeski in Brussels. "The headwinds of the financial crisis and the global economic slowdown are blowing right in the face of the German economy."
British exporters have already been feeling the pain of Germany's economic troubles and the Bank of England yesterday warned Britain faces a deep recession.
Germany is our biggest global market after the US, buying about £31 billion of British goods and services a year.
The euro sank against a host of currencies, down 0.05 cents against the US dollar to $1.2545, but was still up 1.19p against the ever-weakening pound to a record high of 84.39p.
Stefan Bielmeier of Deutsche Bank in Frankfurt said Germany faces "a long, drawn-out recession" and forecast the economy will shrink 1.5% next year, the worst since after World War Two.
"Unfortunately, we don't see any respite any time soon," he said. "Where should the growth come from?"
Faced by the sharp declines in their economies, governments are increasingly moving towards making big fiscal spending plans to attempt to restart demand.
Chancellor Alistair Darling is expected to unveil a host of tax breaks in the Pre-Budget Report a week on Monday while Barack Obama is pushing for an urgent package to help American carmakers.
Germany's economy was hit by a fall in exports with orders down by 11.4% between August and September.
Reader views (3)
The Government has decided to do everything they can to get the £Pound into parity with the Euro. The Governor of the Bank of Englands remarks are in line with this belief. Sterling will disappear with four major currencies left Yuan Dollar Euro Yen. The Dollar will probably be junked or devalued or most likely revalued. Gold will be escalated in value as some sort of base reserve tied to the IMF. he value could be escalated to between $5,000 to $10,000 an ounce. These matters will be decided at the IMF meeting known as the G20 during the coming weekend. These are long term plans that include the final undermining of the nation state and breaking the world into three areas. Americas, Europe and Africa, Asia. Thats the plan of the Trilateral commission. The plan is to make the economies so horrible that people will beg the government to join the EURO.
One can only hope some miracle occurs to stop this madness. The wealthy elite want the end of democracy that is why the EU is called post democratic. Freedom of expression and speech will disappear. This weekend will be secret but the roll out will start to be seen as they use the drip, drip effect as has been done on Europe.
- Jas, Farnborough UK
But of course Germany cannot control its own interest rates which means that the current levels may suit some countries but not others in the EU...and for that reason you cannot lump together 'Europe' as one 'trading partner' and assume that the ebb and flow of recession and growth are as one in the whole area. They are not and never have been - one country might grow and another might suffer a severe downturn. All we know is that everyone is suffering at the moment - it's a matter of degree. And it's all very well for economists in Germany to complain about a strong euro - but no nation ever did well long term by welcoming a weak currency...after all they have to buy raw materials to make all those first class goods as well as sell.
- Damian Hockney, London, UK
It is unfortunate that the pound is thought be "ever weakening," which is, in my view, a result of the intemperate remarks by the Govenor of The Bank of England. Careless talk has cost sterling very badly and, of course, the expatriate community in the Euro Zone. Is there a way we may be able to gain some compensation, as business will surely receive through lower interest rates? Does anyone of influence read these comments or are we to continue to be subject to the mercy and attitudes of the currency speculators!? May we have some answers to this?
- Arthur Lincoln, London
