Commissioner Gentiloni of the European Union states that Germany is not the sick man of Europe.

WLike other research institutes, the EU Commission also expects the German economy to shrink this year, unlike any other economy in the EU. In its interim forecast for the end of summer, presented by EU Economic Commissioner Paolo Gentiloni in Brussels on Monday, the EU agency expects Germany’s real gross domestic product (GDP) to shrink by 0.4 percent in 2023. On the other hand, the other major economies in the EU, such as Italy and France, are expected to grow by approximately 1 percent, while Spain is expected to grow by 2.2 percent. The Commission predicts an average growth of 0.8 percent for the Eurozone, compared to its previous forecast of 1.1 percent in May.

Keine geldpolitischen Empfehlungen

Gentiloni rejected the recent interpretation that Germany is the „sick man of Europe“ as it was 25 years ago. He attributed Germany’s difficult development mainly to the consequences of the Russian attack on Ukraine, particularly the high energy prices due to Germany’s reliance on Russian gas. Gentiloni did not comment on Germany’s climate and energy policy, but he stated that the German economy is strong enough to recover soon. The Commission expects a GDP growth of 1.1 percent in Germany for the coming year, which is in line with the growth in France (1.2 percent) and Italy (0.8 percent). The Commission forecasts a growth of 1.3 percent for the entire Eurozone in the coming year.

The Brussels authority, like other economists, expects inflation rates for the current year that are well above the European Central Bank’s (ECB) target of 2 percent. In Germany, inflation will be 6.4 percent, higher than the Eurozone average of 5.6 percent. The Commission only expects inflation rates to align in 2024, but they will still remain significantly above 2 percent. In all major Eurozone countries, inflation will be close to the Eurozone average of 2.9 percent, while in Germany, it will be 2.8 percent.

Gentiloni stated that the Commission will not provide monetary recommendations to the ECB. However, he believes that interest rates may have reached their peak gradually. The Italian once again urged member states to reach an agreement on reforming the EU Stability Pact by the end of the year. The rules of the pact have been suspended until the end of the year, initially due to the pandemic and then due to the war in Ukraine. Gentiloni mentioned that not everyone was pleased with this suspension, as it would not be beneficial for growth to extend the status quo.