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Historical contraction for the German economy of minus 9.7 percent | NOW

The German economy shrank by 9.7 percent in the second quarter compared to the first quarter of 2020, according to figures from the statistical office. Destatis. The contraction is less severe than a previous estimate by the CBS counterpart, but the deep red figures are still historical.

The previous record contraction dates from the first few months of 2009. At the low point of that economic crisis, the economy of our eastern neighbors contracted by 4.7 percent, much less than the contraction in the past quarter.

Just as in the Netherlands, lower consumer spending is the main cause of the historic downturn in the economy of our eastern neighbors. German consumers spent nearly 11 percent less between April and July than in the first quarter. More than 20 percent less German goods were also exported abroad.

According to the statistics office, the damage was somewhat limited by the German government, which increased expenditure by 1.5 percent. As in the Netherlands, Berlin has tried to reduce the damage of the corona crisis by helping companies in need, investing money in short-time working and through state participations. Thus the German state became a major shareholder in the airline Lufthansa.

Due to the higher expenditures and lower revenues of the German government, the budget deficit rose to 51.6 billion euros in the first six months. Relative to GDP, the budget deficit was 3.2 percent, just above the 3 percent agreed at European level. Due to the corona crisis, these rules are currently not applied.

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