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Angela Merkel has been teetering on the brink of recession for months, with the coronavirus outbreak threatening Germany’s economy with a severe hit. German GDP only shrank 2.2 percent in the first four months of 2020 compared to other European Union members taking a harsher blow because of forced business shutdowns. But economist Carsten Brzeski warned the Chancellor should brace for more worrying developments later in the year.
Discussing the results for the first quarter, Mr Brzeski told CNBC: “For the time being, it is as expected.
“Not as strong, not as severe as in other European countries because the construction sector was still strong in the first quarter.
“But the most important thing is this was just the first two weeks of lockdown.”
He continued: “Now we’re going into the second quarter, this number gives us a sort of flavour that the second quarter will be much worse.
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“We will then probably be back at numbers that are worse than the worst thing we saw during the 2008-2009 crisis.”
Angela Merkel this week joined forces with French President Emmanuel Macron to propose a news £448 billion rescue package to keep the EU from full economic meltdown.
But the Chancellor has been warned the proposal could trigger the collapse of the bloc if Germany “falls to its knees” because of debts incurred to rescue the union.
Hans Michelbach from the Christian Social Union, whose Merkel’s CDU has been in coalition with since 2017, issued the warning in an interview with German magazine Deutschlandfunk on Wednesday.
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Mr Michelbach said: “My impression, given the reactions from other capitals, is that the proposal can divide the European Union more than unite it.
“If Germany falls to its knees, the EU will as well.
Germany has so far taken more than a trillion euros into its hands to fight the crisis.
“The revival of our economy will cost tens of billions more.
“And we already agreed 540 billion at the EU level last week in the German Bundestag.”
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He added: “Germany is also asked to pay for this. And now another 500 billion euros, to which Germany would have to contribute the lion’s share again.”
Germany and France’s joint proposal would allow countries hit the worst by the pandemic to access additional financing through extra borrowing.
The bonds would then be repaid through the bloc’s common budget.
The European Parliament also urged the Commission to set up a €2trillion (£1.7trillion) overall package which would include both EU spending and estimated private sector participation.
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