Habeck defends German economy as output drops

Vice Chancellor Robert Habeck defended Germany's competitiveness in the global economy during a parliamentary debate on Thursday.

Habeck also serves as Germany's economy minister. Lawmakers are currently discussing the Cabinet's proposed budget for 2024.

The German government took its 2024 budget to parliament on Tuesday. Finance Minister Christian Lindner defended cuts in the budget as necessary to limit increases to Germany's deficit.

Germany still 'highly attractive' — Habeck

"We have problems, problems that are related to the geopolitical situation as well as homemade problems. But that does not mean that everything is bad," Habeck said.

"We are a strong location. We are a highly attractive location for foreign investors," he said. "Let's break away from the sloppiness of the past, let's unleash Germany's economic power, let's renew prosperity."

Habeck said that there is a "spirit of cooperation" in Germany and urged lawmakers to embrace Chancellor Olaf Scholz's suggestion of a "Germany Pact."

Scholz on Wednesday urged Germany's democratic parties to work together to modernize Germany, speed up wait times for administrative procedures and combat the economic crisis. He called for a "new national effort" to make Germany "faster, more modern and more secure."

German industrial output dips for third month

Meanwhile, data from the official statistics agency Destatis showed that German industrial production fell by 0.8% in July compared with the previous month.

This is the third month in a row to see a decrease in output, with June registering a drop of 1.4%.

Inflation and high energy prices have taken their toll on the German economy. China's own weakening economy has also led to a drop in demand for German exports.

The German economy slipped into a recession earlier this year and has since stagnated. The International Monetary Fund (IMF) has forecast that Germany will be the only major advanced economy to shrink in 2023.

Think tank predicts continued 'slowdown'

Also on Thursday, the Munich-based IFO think tank predicted that Germany's economic recovery will take longer to arrive than previously expected.

"Contrary to expectations so far, the recovery is likely to fail to materialise in the second half of the year," IFO's head of economic research, Timo Wollmershäuser, said in Berlin.

"The slowdown is continuing, and the trend is towards slackness in almost all sectors," he stressed.

According to the institute's forecast, economic output will decline by 0.4% this year and inflation will reach 6%.

IFO said it expected the German economy to grow by 1.4% this year, slightly below the 1.5% it had predicted in June.

However, the institute has presented a more positive outlook on private household consumption.

"The increase in disposable household income will remain strong and, with inflation rates slowly falling, will also lead to an increase in purchasing power," Wollmershäuser said.

The institute forecast that Germany's budget deficit would only decrease slowly, from €92 billion ($98.5 billion) this year to €80 billion next year.

sdi/sms (dpa, AFP)

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