.jpg)
1 hour ago
3
Article content
(Bloomberg) — Germany cut its growth forecast for this year in half after the US war on Iran triggered a spike in energy prices for industry and households.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.
- Daily content from Financial Times, the world's leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
SUBSCRIBE TO UNLOCK MORE ARTICLES
Subscribe now to read the latest news in your city and across Canada.
- Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.
- Daily content from Financial Times, the world's leading global business publication.
- Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
- Daily puzzles, including the New York Times Crossword.
REGISTER / SIGN IN TO UNLOCK MORE ARTICLES
Create an account or sign in to continue with your reading experience.
- Access articles from across Canada with one account.
- Share your thoughts and join the conversation in the comments.
- Enjoy additional articles per month.
- Get email updates from your favourite authors.
THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.
Create an account or sign in to continue with your reading experience.
- Access articles from across Canada with one account
- Share your thoughts and join the conversation in the comments
- Enjoy additional articles per month
- Get email updates from your favourite authors
Sign In or Create an Account
or
Article content
German output is set to grow by 0.5% this year, the Economy Ministry in Berlin said Wednesday. That compares with a January projection for a 1% expansion. The ministry also revised its outlook for next year down to 0.9% from 1.3%.
Article content
Article content
Article content
“The economic recovery expected this year is once again being held back by external geopolitical shocks,” Economy Minister Katherina Reiche said in an emailed statement ahead of a press conference in Berlin. “The war in Iran is driving up energy and commodity prices. This is putting a strain on households and increasing costs.”
Article content
By signing up you consent to receive the above newsletter from Postmedia Network Inc.
Article content
The deteriorating environment will add to the pressure on Chancellor Friedrich Merz and his divided coalition. The conservative leader has staked his government on reviving Europe’s largest economy and has run into trouble with his efforts to fix a welfare system which is swallowing up an ever-bigger share of the country’s resources.
Article content
Merz and his Finance Minister Lars Klingbeil, from the center-left Social Democracts, are negotiating deep cuts to benefits for German voters as they seek to close a budget shortfall of €140 billion ($164 billion) through 2029. With both parties languishing near record lows in opinion polls and far-right Alternative for Germany siphoning off support from disaffected workers, neither the chancellor nor his finance chief have much leeway to reach a compromise.
Article content
Article content
Their dilemma is likely to become all the sharper as slower-than-expected growth hits tax revenue and nudges up spending to support the jobless, whose numbers have been creeping up for the past four years.
Article content
The German economy has been buffeted by the US tariff offense and the increasing competitiveness of Chinese companies in core export industries like high-tech machinery and automotives.
Article content
Inflation risks are also building, raising the prospect of an increase in interest rates from the European Central Bank later this year. The ministry forecast that consumer prices will rise by 2.7% this year and 2.8% in 2027.
Article content
Merz had sought to respond to that challenge with a €500 billion investment plan to upgrade German infrastructure and by removing government borrowing constraints for spending on defense. But he’s struggled to force the infrastructure money through Germany’s complex bureaucracy and activity has been dragged down by global headwinds.
Article content
The International Monetary Fund last week cut its own forecasts for global growth and warned that the Iran war could tip the world economy into recession if it isn’t resolved quickly.
Article content
US President Donald Trump this week announced an indefinite extension to a ceasefire with Iran but peace talks are stalled by brinkmanship over the critical Strait of Hormuz.
Article content
Article content
English (US)