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Ripples from the German recession are spreading across Europe

By Philip Smith

Italy and the UK also face slump as effects of trade wars hit home

Ripples from the German recession are spreading across Europe

The German economy is heading for recession. That’s bad news for the Eurozone but there is also concern that the UK and Italy may soon face the same trouble.

Better-than-expected gross domestic product (GDP) figures for August (dropping to a still positive 0.3%) mean the UK has escaped negative growth for now. Italy is forecasting growth of 0.2% but both economies are still precarious.

Are outside factors affecting European economies or is German weakness spreading? Business Insider says that Germany’s reliance on exports make it a victim of slowing global trade resulting from the China-US trade war.

And according to Standard and Poor’s: “In Europe, the direct effects of US-China trade friction will be felt in sectors with medium to high technological content like transport equipment, motor vehicles, rubber and plastics, chemical products and pharmaceuticals.”

If German decline is driving the misfortunes of other EU economies, the ripples would spread far, but as the German Institute for Economic Research, reported in the Daily Telegraph, says: “Compared with southern Europe or Italy we look fantastic. Compared to the Nordics we don’t look so good at all.”

In fact, the Swedish economy grew by just 1% last year. That’s better than many but hardly amounts to stratospheric growth. “A lengthy manufacturing slump and escalating trade wars will cause global growth to slow from nearly 4% in 2018 to just over 3% in the coming years,” said the Nordic Outlook – a review of the region’s growth prospects – indicating that it expects tougher times ahead because of global trade wars.

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