Europe
German government revises growth forecasts: Recession expected to continue into 2024
Germany is facing a two-year recession for the first time since the early 2000s, prompting the government to slash its 2024 growth forecast for the Eurozone’s largest economy.
If Economy Minister Robert Habeck’s forecast for this year is correct, Germany will experience a two-year recession for the first time in more than 20 years, after output shrank by 0.3 percent in 2023. In 2002, the economy contracted by 0.2 percent, followed by a 0.5 percent decline in 2003.
“The economic conditions are currently unsatisfactory,” Habeck said on Wednesday. “But we are in the process of finding a way out of this situation,” he added.
The minister argued that Germany has made “real progress” in recent years in addressing the “short-term” factors—rising inflation, high interest rates, and surging energy costs due to the war in Ukraine and subsequent anti-Russian sanctions—that have depressed output.
However, Habeck pointed out that longer-term structural issues, such as “Germany’s serious skills shortage,” years of underinvestment in infrastructure, and excessive bureaucracy, continue to hold back growth.
Habeck, who also serves as vice-chancellor, predicted that GDP would shrink by 0.2 percent this year, a sharp downgrade from an earlier forecast of 0.3 percent growth.
With energy prices falling, ministers and economists had initially hoped the economy would see a temporary recovery this year. But a steady stream of pessimistic data in recent months has clouded the outlook. “The recovery has been postponed once again,” Habeck said.
Citing high labor and energy costs, a heavy tax burden, and political uncertainty, some companies are considering moving production to cheaper countries, raising fears of deindustrialization in Europe’s largest economy.
Despite these concerns, Habeck expressed cautious optimism that the economy would begin to recover next year, as lower inflation and easing interest rates, combined with rising real wages, are expected to boost consumer spending.
The minister suggested that “in the last three to four quarters, people have started to feel wealthier again.”
Habeck’s ministry expects the economy to grow by 1.1 percent in 2024 and 1.6 percent in 2026, driven by stronger private consumption, increased investment, and rising international demand for industrial goods.
However, Habeck emphasized that Germany’s economic challenges run much deeper, noting that the two pillars of the country’s success—cheap Russian gas and well-functioning global markets, both critical for a leading exporter like Germany—no longer exist.
According to Habeck, the first pillar has been undermined by the war in Ukraine, while the second has been destabilized by China’s “aggressive export strategy” and rising U.S. protectionism.
“Half of Germany’s growth has always come from exports, and this pillar is now under threat. We have essentially not grown at all since 2018,” Habeck said.
Despite his cautious optimism about short-term improvements, the Green minister suggested that Germany’s long-term growth potential remains low.
“Even if we did everything right—reduced bureaucracy, had the necessary skilled workers, and secured the needed capital—we would only be looking at a growth potential of about 0.6 percent,” Habeck said.
He attributed this to “the failures of past decades, not just the past few years,” pointing out that successive governments had not invested enough in infrastructure, digitalization, and the mobilization of skilled labor.
Europe
EU states hold talks with Taliban in Brussels on Afghan returns
Representatives from 15 European Union member states met with the Taliban in Brussels on June 23 to discuss the return of Afghan nationals to Afghanistan.
A European Commission spokesperson said on Tuesday that the meeting was co-chaired with Sweden. Belgium and the Netherlands also took part.
The Commission stressed that the discussions primarily focused on the return of Afghan citizens with criminal records or those considered security threats.
Talks covered a wide range of issues, including the identification of returnees, the issuance of travel documents and procedures related to their repatriation.
However, Johannes Luchner, a senior European Commission official who travelled to Kabul in January, had previously indicated that the scope could extend beyond convicted individuals.
Addressing European lawmakers at the end of January, he said: “Our primary concern is the return of criminals, but the number of non-criminal Afghans who have received return orders is also increasing.”
Another EU source has now expressed a similar view. Speaking to EUobserver on Tuesday ahead of the meeting, the source said the discussions would also cover the return of asylum seekers whose applications had been rejected.
Earlier in the day, the Commission declined to provide details about the meeting.
As a result, questions remained unanswered regarding who covered the Taliban delegation’s travel expenses, where the meeting would take place, whether women would participate and what the Taliban expected in return for assisting the EU with deportations of Afghan nationals.
The EU and its member states have not recognised the Taliban government since it returned to power five years ago.
Brussels defended its decision to maintain limited contacts with Afghanistan’s “de facto authorities,” arguing that such engagement is necessary to facilitate the deportation of rejected asylum seekers who have committed crimes or are considered dangerous.
A European Commission spokesperson said officials from the Commission and 15 EU member states attended the Brussels meeting, which followed a previous gathering held in Kabul in January.
“The Commission services and Sweden today co-chaired a technical-level meeting in Brussels together with technical-level representatives of Afghanistan’s de facto authorities responsible for return and readmission matters,” the spokesperson said.
A spokesperson for Afghanistan’s Foreign Ministry said the agenda was broader and included the possibility of a future consular presence in the EU, the resumption of consular services for Afghans living there and “the need for confidence-building measures.”
Spokesperson Abdul Qahar Balkhi added that the meeting raised hopes of creating “positive momentum to safeguard the consular rights of Afghans residing abroad.”
According to a European Commission letter addressed to Balkhi and reviewed by Reuters, the discussions would focus on “the return and readmission of Afghan nationals without a right to reside in the EU.”
Europe
EU defence chief calls for integration of Ukraine’s military into European defence architecture
The European Union’s Defence Commissioner, Andrius Kubilius, said the bloc should integrate Ukraine into a future European defence union, speaking at the European Defence and Security Summit in Brussels.
According to remarks reported by Reuters, Kubilius said: “It would be difficult to make sense of things if we did not regard the integration of Ukraine’s armed forces into our defence architecture in Europe as a vital issue.”
Kubilius stressed that Ukraine currently holds a dominant position on the battlefield thanks to the transformation of its military doctrine.
Calling for the integration of Europe’s defence industry and Ukraine’s manufacturing facilities into a single military structure, Kubilius said Ukraine should be fully integrated into the EU’s military market.
He added that the European Commission could present a detailed analysis of the defence market and initial proposals for next steps as early as next week.
At a later stage, the commissioner said, the Commission would propose changes to defence procurement rules and other market regulations.
Kubilius also outlined a strategic objective for the European Union.
He argued that EU member states should spend around €7 trillion on arms production over the next decade in order to surpass Russia in military strength and weapons stockpiles. According to Kubilius, such spending would be consistent with commitments under NATO to raise defence budgets to 5% of gross domestic product.
Urging Europeans to be prepared to bear the cost, Kubilius described it as “the price of peace.”
At the same time, he suggested moving away from the production of highly sophisticated weapons that are difficult to manufacture in large quantities. Instead, citing the example of drones used in Ukraine, he called for a focus on producing “enormous quantities of satisfactory weapons.”
The EU Defence Commissioner also underscored the need to integrate Ukraine’s innovative defence industry into Europe’s broader defence and technological base.
Europe
Hungary blocks joint EU letter backing Ukraine and Moldova accession process
Hungary has refused to endorse a joint letter intended to be sent on behalf of all 27 European Union member states to the European Council and the European Commission in support of Ukraine’s and Moldova’s accession to the bloc.
According to Politico, citing sources familiar with the matter, the letter is required for Kyiv’s and Chisinau’s membership applications to advance to the next stage of the accession process.
The sources said Hungary was the only member state that declined to back the document. Because approval requires the consent of all 27 member states, the issue is expected to be revisited next week.
Hungary, which previously blocked Ukraine’s accession negotiations for an extended period, was led at the time by Prime Minister Viktor Orban. His successor, Prime Minister Peter Magyar, has not opposed the launch of the negotiation process but has insisted on removing the phrase “as soon as possible” from the draft letter’s reference to Ukraine’s accession.
Magyar said Hungary does not support opening all negotiating chapters simultaneously in an effort to accelerate Ukraine’s membership bid.
Explaining the government’s position, he said: “Partly because the ink on the documents relating to the first chapter has barely dried, and partly because this would send the wrong message to Western Balkan countries such as Serbia, Albania, Montenegro and North Macedonia, which have been working for years to become members of the European Union.”
The European Union formally opened the first chapter of accession negotiations with Ukraine and Moldova in June. The process was launched during a ceremony in Luxembourg attended by the foreign ministers of member states and is divided into six thematic clusters covering different areas of legislation and policy.
The opening of the first cluster, which covers core issues including the rule of law, the functioning of democratic institutions and public administration, marks the transition from the preparatory phase to practical work on meeting accession requirements.
The EU’s ambassador to Ukraine, Katarina Mathernova, has said Kyiv could join the bloc by 2030, although the final timeline will depend on how quickly the Ukrainian authorities complete the required legal and institutional reforms.
Mathernova also said she hoped all 33 negotiating chapters could be opened by the end of the summer.
-
Europe2 weeks agoAfD says Ukraine should compensate Germany over Nord Stream sabotage
-
Opinion1 week agoA voice rising from New Delhi: BRICS’s manifesto for a new world order
-
Europe2 weeks agoToyota and JLR warn EU ‘Made in Europe’ rules could threaten jobs and investment
-
America1 week agoData leak exposes Peter Thiel’s secret ‘Dialog’ network of politicians, regulators, and tech elites
-
Middle East1 week agoMine clearing in Strait of Hormuz could delay shipping traffic for up to 50 days
-
Diplomacy1 week agoIran discloses 14-point draft US peace accord detailing sanctions relief, regional security measures
-
Diplomacy2 weeks agoSpaceX IPO raises concerns over European capital outflows and telecom competition
-
Russia1 week agoPatrushev urges assertive Russian naval presence to counter NATO encirclement strategy
