Latest news with #ifoInstitute
Yahoo
18-05-2025
- Business
- Yahoo
East German leader demands more federal aid as data shows some uptick
The state premier of Mecklenburg-Vorpommern has called on the new government of German Chancellor Friedrich Merz to take decisive action to kick start the sluggish economy. "No economic growth for the third year in a row – that's not acceptable," said Manuela Schwesig, of the centre-left Social Democrats, at the opening of the annual East German Economic Forum, this time in the town of Bad Saarow. But an economic report presented at the forum showed some positive signs for the east German economy. Eastern Germany has made notable gains in economic performance, research and quality of life, but still trails structurally behind the west, according to a study by the ifo Institute in Dresden for the Central German Foundation for Science and Education. The study compared the economic, social and scientific development of east and west Germany based on around 170 indicators. It also highlighted differences within eastern Germany itself, showing that the region is not a homogeneous economic area but is characterized by regional strengths. Schwesig identified lower energy prices, increased investment and reduced bureaucracy as key priorities, emphasizing that getting Europe's biggest economy back on track should the top political goal. In addition to permanently offering affordable energy for both businesses and consumers, she urged the federal government to introduce "fair grid fees that reward regions investing in renewable energy rather than penalising them." Regional economic differences The ifo report showed some regional strengths in east Germany, though Schwesig's Mecklenburg-Vorpommern, a comparatively poor region, was not highlighted. For example, Saxony's export rate of 32% exceeds the west German average, while Thuringia's industrial share matches that of Bavaria. Berlin and Saxony also stand out in research spending, ranking among the top regions in Europe. Overall, eastern Germany's economic performance, measured by gross domestic product (GDP) per hour worked, stands at 86% of the west German average. Between 2019 and 2024, annual economic growth in the east outpaced the west by 0.3%, largely attributed to Berlin's economic boom. Lower immigration but higher real wages The monitor also highlights challenges: the proportion of foreign residents in the east is significantly lower at 7.2% compared to 15.6% in the west. However, real wages in the east exceed 90% of the west's level, thanks to lower living costs. The report was presented at the forum by the "Saarower Kreis," a group of east German economic stakeholders aiming to provide fact-based impulses for structural policy. "Eastern Germany is not a homogeneous weak zone but a laboratory for the future," spokesman Frank Nehring stated. He added that the region needs more confidence in its strengths and the courage to think innovatively in economic policy. At the three-day conference, business leaders are to discuss the challenges facing eastern Germany as a business location with members of Merz's new conservative-led coalition government. Companies have long complained about high energy costs, a shortage of skilled workers, heavy tax and social security burdens and excessive bureaucracy.
The Star
30-04-2025
- Business
- The Star
German economy edges up in Q1 but U.S. tariffs raise recession fears
BERLIN, April 30 (Xinhua) -- Germany's economy recorded modest growth in the first quarter of 2025, offering a brief reprieve after two consecutive years of contraction. However, economists caution that the recovery could stall as early as this summer due to escalating trade tensions with the United States. Preliminary figures released Wednesday by the Federal Statistical Office showed that Germany's gross domestic product (GDP) grew by 0.2 percent compared to the previous quarter, following a 0.2-percent contraction in the final quarter of 2024. The agency also noted a rise in investment and household spending during the first three months of the year. Despite this quarterly uptick, the economy contracted by 0.4 percent year-on-year after adjusting for price changes, highlighting ongoing challenges for Europe's largest economy. Timo Wollmershaeuser, head of forecasts at the Munich-based ifo Institute, noted that recent tariff increases by the United States temporarily boosted German exports in early 2025, as American importers rushed to make purchases ahead of the new levies. However, he warned that escalating trade tensions and uncertainties are clouding the outlook for industrial production and business sentiment in Germany. "The noticeable increase in tariffs on imports from the European Union that came into force in April, along with the threat of further tariff increases, weighed on the future course of German economy," he added. The ifo Institute now predicts that Germany's economy could slip back into contraction as early as the summer. Last week, the German government sharply downgraded its 2025 growth forecast to zero, citing the adverse effects of U.S. trade policies under President Donald Trump. If realized, this would mark the third consecutive year without economic growth.
Yahoo
24-04-2025
- Business
- Yahoo
Survey: German business sentiment improves despite US trade war
Sentiment among German businesses improved in April despite the new tariffs announced by US President Donald Trump, according to a survey by a leading German economic institute published Thursday. The ifo Institute's business climate index saw a slight uptick this month, rising by 0.2 points to 86.9 points, and defying economists' expectations who had expected business sentiment to worsen after Trump announced a slew of new tariffs on April 2. However, the report suggests that expectations regarding future business among the 9,000 companies surveyed have deteriorated slightly. "Uncertainty among the companies has increased," ifo institute president Clemens Fuest noted, adding that "the German economy is preparing for turbulence." But companies assessed the current business climate to be more favourable, with sentiment improving in particular in the service sector, according to the survey. "Companies were more satisfied with the current business situation," while "expectations remained slightly skeptical," the institute said. In the construction sector, sentiment rose to its highest level since May 2023, the survey found. Meanwhile, the index fell among manufacturing and trade companies, following improvement in the previous month, with the uncertainty surrounding Trump's trade policies weighing on industry. Landesbank Baden-Württemberg analyst Elmar Völker said the survey indicated "a small light at the end of the tunnel," but cautioned against premature optimism. Companies evidently believe that they can adapt to the new conditions in the global economy, said chief economist Ulrich Kater from Dekabank. "Hopes are pinned in particular on the European domestic market and other major economic regions outside the US."
Yahoo
03-04-2025
- Business
- Yahoo
Germany faces new world trade order amid triple threat from US duties
Germany awoke to a radically transformed global trade order on Thursday, hours after US President Donald Trump's announcement of sweeping customs duties. The United States is set to introduce blanket tariffs of at least 10% on all goods imported into the United States, and a 20% toll on imports from the European Union. As a major exporting nation, Germany is likely to be hit hard by the tariffs, which are due to take full effect on April 9. The country's leading stock market index, the DAX, tumbled 2.3% shortly after opening on Thursday as investors pondered the consequences for Germany's crucial automotive, pharmaceutical and industrial sectors. Trade expert Lisandra Flach from the Munich-based ifo Institute said it was a "bitter day for the global economy" and warned that Germany - Europe's largest economy - faces a triple threat from the new US policy. The US was Germany's leading trade partner in 2024, and the first to suffer from the additional tariffs will likely be German exports to the US. These amounted to €161 billion ($177 billion) in 2024, forming around 10% of total German exports. Secondly, the tariffs' massive impact on the Chinese economy - which faces US duties of 54% - will likely lead to a significant drop in Beijing's purchasing power, harming German companies' prospects in the vital Chinese market. And German goods are also likely to face massive competition from countries such as China that will be seeking new markets following their effective exclusion from the US. Berlin can initially expect a 0.3% decline in gross domestic product (GDP), Flach said. Scholz denounces 'attack' on global trade order Responding to the policy shift in Berlin on Thursday, German Chancellor Olaf Scholz warned of an "attack" on the global trade order. "The entire global economy will suffer from these ill-considered decisions - companies and consumers all over the world, including in the United States," said Scholz after a meeting with Jordan's King Abdullah II, who is in the German capital for a conference on people with disabilities. The outgoing chancellor echoed comments from Economy Minister Robert Habeck, who earlier said that US tariff "mania" could cause "massive damage worldwide." Habeck, who also serves as Germany's vice chancellor, said the impact of Trump's announcement could be directly compared to the Russian invasion of Ukraine and the subsequent European energy crisis. The tariffs are the most disruptive in 90 years, and they could "set off a spiral that could drag countries into recession" with "dire consequences for many people," the minister added. Automotive industry faces 'massive burden' Particularly vulnerable to Trump's aggressive tariff policy are German carmakers. US tariffs of 25% on all imports of cars went into force overnight, marking a "fundamental break in trade policy," said Hildegard Müller, president of the German Association of the Automotive Industry (VDA) trade group. "The announced measures are also a massive burden and challenge for both companies and the global supply chains of the automotive industry," she added. The United States is the most important export market for the German automotive industry, which produces iconic brands such as Volkswagen, Mercedes-Benz, BMW and Porsche. According to VDA figures, almost 450,000 German-made vehicles were exported to the US in 2024. Business leaders warn of 'open trade war' after 'American Brexit' German business leaders reacted to the tariff announcement with shock on Thursday. Dirk Jandura, president of the Federation of German Wholesale, Foreign Trade and Services, called the decision a "frontal assault on global trade." "With drastic tariff increases for more than 100 trading partners, the US president is plunging the world into an open trade war with an American Brexit," Jandura said. "I assume that conflict will have a significant impact on our economic growth." Wolfgang Niedermark from the Federation of German Industries said that the tariffs were "an unprecedented attack on the international world trade system, free trade and global supply chains." The move "threatens our export-oriented companies and jeopardizes prosperity, stability, jobs, innovation and investment worldwide," he added. United EU response needed European countries must react united to stand up to the new US policy, Niedermark said. "The EU must now strengthen its alliances with other major trading partners and should coordinate its response with them." Similar sentiments were expressed by the outgoing chancellor, who said that the EU is still prepared to negotiate with Washington to avert the tariffs. "We are focusing on cooperation, not confrontation," said Scholz. Habeck emphasized that the EU will continue to seek negotiations with the Trump administration in the coming days. "We have always pushed for negotiations, not confrontation. That remains the right approach," he stated. If the tariffs do take effect, however, Habeck said that Germany and the European Union are ready to respond. "We have the largest single market in the world. We must utilize this strength," the minister added.
Yahoo
03-04-2025
- Automotive
- Yahoo
Germany faces triple threat from US tariff shock, trade expert warns
Germany faces a triple threat following US President Donald Trump's sweeping new global tariffs announcement, a trade expert warned on Thursday. Lisandra Flach from the Munich-based ifo Institute said called the move - which included a blanket minimum 10% duty on all imports, and a 20% toll on goods from the European Union - a "bitter day for the global economy." Germany could initially expect a 0.3% decline in gross domestic product (GDP), Flach said. But the expert warned that Europe's largest economy, which is hugely dependent on exports of goods such as cars and chemicals, is likely to be further hit in three distinct ways by the new US policy. First to suffer will be German exports to the US - the leading market for Germany's crucial automotive sector. Secondly, the tariffs' massive impact on the Chinese economy - which faces US duties of 54% after Trump's announcement - will likely lead to a significant drop in German exports to Beijing. And thirdly, German goods are likely to face massive competition from countries such as China that will be seeking new markets following their effective exclusion from the US. "The crucial question is how other countries will react - not just to US tariffs, but to protectionism in general," said Flach. "In the worst-case scenario, an escalation could bring trade to a standstill."
