Germany’s economy plunged into a record slump in the second quarter, when COVID-19 restrictions slammed businesses and households across Europe, destroying jobs and prompting an unprecedented policy response.
Output fell 10.1 percent, the most since the quarterly series began in 1970, with exports, consumer spending and investment declining.
While survey indicators signal a recent return to growth, higher unemployment remains a risk, which would threaten the recovery.
The pace of the rebound would rely in part on the effectiveness of the government’s 130 billion euros (US$152.7 billion) stimulus approved last month and how fast can demand for German exports return to pre-pandemic levels.
However, given concerns over new outbreaks of the virus, the outlook is uncertain, even after an unprecedented EU fiscal deal championed by Germany and France.
A similar picture is playing out across the eurozone, which might suffer a 12 percent contraction in the quarter.
Governments across the region have stretched their budgets on health and welfare spending, and the European Central Bank launched an emergency bond-buying program to get the economy through the crisis.
Germany had less severe containment measures at the height of the crisis, and was able to utilize long-established support measures that allowed firms to keep millions of staff on payrolls and prevent a jump in joblessness.
“The labor market is still under pressure due to the corona pandemic, even if the German economy is on a recovery path,” Daniel Terzenbach, executive board member of the German Federal Employment Agency, said in a separate release yesterday.
Germany’s fiscal situation was also stronger, allowing the government to mobilize trillions of euros in various rounds of stimulus to help struggling businesses and households with loan guarantees, equity injections and additional liquidity.
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