Germany is Europe’s sick man, but others are coughing

GERMANY, the sick man of Europe, is about to end a quarter it would rather forget. The first three months of 2024 probably marked its second straight quarter of economic contraction, and for the full year it’s expected to deliver little to no growth. Its industrial powerhouse has become a liability, with demand still subdued, and a deglobalising world has robbed it of levers like Chinese exports, cheap Russian gas and a dependable US security guarantee.

The new worry is the coughing sound coming from elsewhere in the euro zone. Economies like trade-dependent Netherlands and Ireland have been big drivers of European growth in recent years (maybe deceptively so in Ireland’s case), but now they’re stalling. France, whose demand-led economy usually zigs when Germany zags, is eking out meager growth despite a swelling budget deficit as higher interest rates bite. Optimism that a recession can be avoided is being tempered by anemic investment and productivity growth.

Which leaves the last big bellwether left standing — Italy, where Giorgia Meloni’s officials are defying the gloom by expecting gross domestic product to expand around 1 per cent this year. That would be better than Germany, France, the Netherlands and the euro average, and would be in keeping with Italy’s outperformance since 2019 despite a history of low growth, high debt and volatile politics. Alongside the likes of Spain and Portugal, which after years of crises are enjoying higher competitiveness and export growth, according to ING research, Italy’s recovery has been a boost for Europe.