Germany was regarded as the powerhouse of the European economy and recorded a shrinking economy on Wednesday with the publication of quarterly figures on gross domestic product. Overall, the data showed that German GDP fell by 0.1 percent in the second quarter of 2019. This represents growth of 0.4 percent in the first quarter and 0.2 percent in the second quarter across the euro area.
The decline is due to a combination of upheavals in the German automotive industry, the undecided exit of Great Britain from the European Union and the trade war between the US and China.
Melanie Vogelbach of the Association of German Chambers of Commerce and Industry told The Telegraph: "The challenges for the German economy are mainly based on international factors: trade conflicts, sanctions and the Brexit scenario without agreements.
"Trade wars are never good, and for an economy as export-oriented as German industry, that's a very important factor."
Economists fear that these factors could trigger the very first recession in the world's fourth largest economy.
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Exports for Germany fell by eight per cent last year for the export-dependent country and industrial production itself by 5.2 per cent.
Ulrich Ackermann, foreign trade manager of the VDMA – expert committee for machinery manufacturers – told the Financial Times: "If companies expect a deterioration in the investment climate, they no longer order components and reduce their stocks, which can happen very quickly.
"It's the first sign that the economy is shrinking. Mostly it's the component companies that get hit first. "
The under pressure Chinese market is one reason why Germany has problems, since by 2018 nearly a quarter of all cars sold in China were German.
According to ING, this was more than a third of the total sales of BMW and Daimler.
The ING economist Carsten Brzeski said: "It is not the actual trade conflict that is most affected, but the structural changes in the Chinese auto market that could turn out to be one of the biggest threats in the coming years."
The labor market is also declining: in June, only 1,000 jobs were created – far less than in June, with an average of 44,000.
In addition, a number of industrial companies have recently cut working hours.
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The decline in German GDP has caused concern among economists and business associations.
Economists and business associations call for measures to combat corporate tax cuts and higher investment in Germany.
In particular, the prospects for a further deterioration in the coming months due to weak exports and weak production figures leave little hope for a rapid recovery, economists say.
Martin Wansleben, Managing Director of the German Association of Chambers of Industry and Commerce (DIHK): "After the good start to the year, the companies have arrived in the difficult economic reality and there is currently no turning point in sight. Business expectations are falling in all industries. "
Wansleben emphasized that in addition to global uncertainties, trade disputes and the effects of Brexit, there is also a headwind in Germany.
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While the average tax burden for companies in western industrialized countries is about 24 percent, the companies in Germany have paid about 30 percent or more corporate taxes.
He warned, "If we do not take any countermeasures, the German economy will literally be affected by a weakening economy."
Klaus Günter Deutsch, head of research, industrial and economic policy at BDI, told the Financial Times: "The government is concerned about this as the economy worsens faster than expected.
"I think attention should now shift to fiscal policy."
There has also been a decline in investor confidence in Germany, which has been at an all-time low since 2011, according to the ZEW research group.
ZEW President Achim Wambach has confidently attributed the shock to a mix of impending no-deal Brexit at a high level, looming global currency war and rising trade tensions between the US and China.
If the economy shrinks again in the current summer quarter, experts are talking about a "technical recession". The last time there were two consecutive minus quarters at the end of 2012.
According to GfK consumer researchers, consumers have recently become more cautious about spending money.
The GfK consumer climate expert Rolf Bürkl has recently reported that the reduction and introduction of short-time work has increased the fear of job losses.
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The head of the German Institute for Economic Research (DIW), Marcel Fratzscher, said in an interview with n-tv: "We see a slowdown in the economy, but it is not a crisis.
"The German economy is healthy from the ground up.
"We have healthy structures, companies are competitive, they are innovative, and the labor market is still doing very well."
Chancellor Angela Merkel said at a readers' forum of the "Ostsee-Zeitung" on Tuesday that she sees no need for economic stimulus packages at the moment, even though the economy is entering a "difficult phase".
Ms. Merkel warned against talking badly about the economy and added, "We will act according to the situation."
Additional coverage by Monika Pallenberg