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Chancellor Angela Merkel adopted a more somber tone on the state of Germany’s economy, saying a difficult patch lay ahead that the government may have to react to.
“It’s true, we’re heading into a difficult phase,” Merkel said at a town hall event in the northern city of Stralsund. The government will closely monitor second quarter economic development and then look at the third quarter, she said. “We will react depending on the situation.”
It is the first time Merkel suggested the government may need to become more proactive in to respond to the country’s economic slowdown, saying that she didn’t see the need for a growth package “so far”.
In recent weeks there have been growing calls in business and politics for the chancellor to adopt stimulus measures. Merkel’s Christian Democratic-led bloc as well as her junior coalition partner, the Social Democrats, have plummeted in opinion polls ahead of key regional elections next month.
Economic growth this year is forecast at just 0.6%, as fallout from the trade war hits Germany’s export-driven industry. Growth slowed from 2.2% in 2017 to 1.4% in 2018. Second-quarter GDP data is due tomorrow, and economists predict the economy contracted 0.1% in the three months through June.
“Domestic demand is still somewhat propping up the economy,” said Merkel, reiterating that she would not seek another public office after her term ends in 2021.
Based on details from the draft 2020 budget proposal published by parliament today, the government will stick to its policy of not increasing net debt.
(Adds details and context throughout.)
–With assistance from Zoe Schneeweiss.
To contact the reporters on this story: Birgit Jennen in Berlin at [email protected];Brian Parkin in Berlin at [email protected]
To contact the editors responsible for this story: Ben Sills at [email protected], Raymond Colitt
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