Germany officially entered a technical recession on Friday after its economy contracted 0.3% in the second quarter of 2025, following a 0.2% decline in Q1, the Federal Statistics Office Destatis confirmed. The two consecutive quarters of negative growth mark the second recession for Europe largest economy in two years, driven by a sharp decline in industrial output, persistently weak demand from China and the US, and elevated energy costs weighing on German manufacturers.
Finance Minister Christian Lindner acknowledged the challenge but said structural reforms would reverse the trend by 2026. The German automotive sector continues to face severe pressure from Chinese EV manufacturers that have captured significant European market share. The Bundesbank revised its 2025 full-year growth forecast to -0.4%, while the IMF called Germany the worst-performing G7 economy. Opposition parties called for urgent investment in infrastructure and digitisation to arrest the industrial decline.
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