# Germany heading for recession despite new relief plan – economists
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-06
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Germany Faces Recession Despite 65 Billion Euro Stimulus
Meta Description: Germany is still on the brink of recession despite a new plan to spend 65 billion euros on shielding energy customers and businesses from inflation. Experts
URL: https://financedigest.com/germany-heading-for-recession-despite-new-relief-plan-economistshtml

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BERLIN (Reuters) – Germany, Europe’s largest economy, is still on course for a recession even with a new government plan to spend 65 billion euros ($64.49 billion) on shielding energy customers and businesses from soaring inflation, economists say.

The latest package brings to 95 billion euros the amount allocated to inflation-busting since the Ukraine war began in February. By contrast, the government spent 300 billion euros on propping up the economy over the two years of the pandemic.

The third relief package does little to [change the fact that Germany](https://www.financedigest.com/scientists-in-germany-turn-up-heat-on-seagrass-in-climate-change-fight.html "Scientists in Germany turn up heat on seagrass in climate change fight") is likely to slide into recession in the autumn,” said Commerzbank chief economist Joerg Kraemer.

ING chief economist Carsten Brzeski agreed: “The package will probably fall short in preventing the broader [economy from falling into recession.”](https://www.financedigest.com/german-economy-expected-to-skirt-recession-economy-ministry-report.html "German economy expected to skirt recession – economy ministry report")

Economists widely define a recession as two or more consecutive [quarters of negative growth](https://www.financedigest.com/impact-com-announces-continued-growth-in-first-quarter-of-2022.html "impact.com Announces Continued Growth in First Quarter of 2022"), or contraction.

The [German economy grew by the narrowest of margins in the second quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter"), and the war in Ukraine, soaring energy prices, the pandemic and supply disruptions are now pushing it towards a downturn, which it may already be in.

A survey published on Monday showed Germany’s services sector contracted for a second month running in August as domestic [demand came under pressure from soaring inflation](https://www.financedigest.com/aussie-supermarkets-set-to-capitalise-on-high-inflation-but-softer-demand-ahead.html "Aussie supermarkets set to capitalise on high inflation, but softer demand ahead") and faltering confidence.

Russia’s decision to stop pumping gas via the [Nord Stream](https://www.financedigest.com/denmark-invites-nord-stream-operator-to-help-salvage-unidentified-object.html "Denmark invites Nord Stream operator to help salvage unidentified object") 1 pipeline adds to Germany’s woes, though Germany’s gas stores reached 85% of capacity on Saturday and Chancellor Olaf Scholz has vowed the country “will come through this.

The relief package cannot change the fact that Germany has become poorer as a net [importer of energy,”](https://www.financedigest.com/factbox-europe-ramps-up-coal-imports-as-energy-supply-fears-grow.html "Factbox-Europe ramps up coal imports as energy supply fears grow") Kraemer said. Companies have to [cut back on the use of energy](https://www.financedigest.com/france-strains-to-avert-power-cuts-as-cold-snap-tests-europes-energy-resolve.html "France strains to avert power cuts as cold snap tests Europe’s energy resolve"), which has become expensive, and cut their production accordingly.

The trade union-affiliated Macroeconomic Policy Institute (IMK) [sees the latest government support measures preventing a drastic decline in consumer](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") demand in the coming months.

The measures could “at least significantly mitigate or possibly even prevent a [recession that is now looming”](https://www.financedigest.com/analysis-euro-peers-over-the-cliff-at-dollar-parity-as-recession-looms.html "Analysis-Euro peers over the cliff at dollar parity as recession looms"), IMK director Sebastian Dullien.

($1 = 1.0080 euros)

(Reporting by Rene Wagner; Writing by Paul Carrel; Editing by Miranda [Murray and David](https://www.financedigest.com/david-murray-joins-veraviews-as-demand-director.html "David Murray joins VeraViews as Demand Director") Evans)


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