Germany’s manufacturing sector has been struggling with sluggish demands from abroad buyers as well as uncertainty over the future trading relationship the European Union will have with the United Kingdom. The bloc on Thursday issued their latest growth estimates for 2020 and 2021 in which they suggested Brexit will remain an issue to keep an eye on but warned coronavirus could have a significant impact on the European economy. China is the third-largest export country for Germany and a slump in the Chinese economy amid the coronavirus pandemic could have serious repercussions on Berlin and, as its largest economy, the eurozone.
Speaking after the released of the European Commissions’ growth report, Sky News Brussels correspondent Adam Parsons said: “The European Commission has released its latest economic report which mentions both Brexit as something that will have to be resolved but it also says COVID-19 is a new downside risk.
“In other words, an economic threat. They say that their model will peak in the first quarter of the year – up to the end of next month – and then start to decline but there is still much unknown.
“That will be watched very closely, particularly in Germany. They have had coronavirus, COVID-19 cases already, but are dependant on manufacturing for a large part of their economy.”
Mr Parsons added: “A lot of those products are sold to China – a downturn in China would affect Germany and the knock-on effect of that would affect the European Union.”
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France saw a 2.8 percent drop in industrial output in December, while Spain posted a 1.4 percent decline – both far worse than economists had anticipated.
The Netherlands added to the gloom, with manufacturing shrinking 1.7 percent, the most since 2018.
There is also a concern among EU member-states that Boris Johnson’s hardline approach to Brexit trade talks could signal another year of economic uncertainty.
And last week US President Donald Trump revived his threat of tariffs on European imports over “unfair” Airbus subsidies.
Marcel Fratzscher, President of the DIW (German Institute for Economic Research, told CNBC: “I am pessimistic about the German outlook because Germany could experience something like the perfect storm.”
He said that there are “so many risks,” such as global slowdown, the coronavirus, geopolitical conflicts, a weak financial sector in Europe and Brexit, that the German government must take “immediate action”.