German economy shrinks as election winners CDU face coalition talks

Germany’s gross domestic product shrunk by 0.2% year-on-year in the last three months of 2024, with manufacturing in particular, in decline.

The new data, which indicates the country slipped into a recession last year, underscored the uphill economic battle that the new government faces as the process of coalition deal-making gets underway between Sunday’s election winners — the center right Christian Democratic Union — and other centrist political parties.

Germany’s strict borrowing rules could prove a flashpoint: The country needs cash to fund infrastructure and other investments, but any attempt to loosen restrictions could face a “blocking minority” made up of the far-left and far-right, the Financial Times noted.

Reciprocal tariffs imposed by US President Donald Trump may also prove a “further headache ahead” for Germany’s export-oriented economy, The Wall Street Journal noted. German exports of goods and services declined by 2.2% for the latest period, the biggest drop since 2020.